Introduction of Candlestick Pattern

Each candlestick has a body and wicks (also called shadows). The body
represents the difference between the opening and closing prices, while the wicks
represent the highest and lowest prices during the time period.

Components of a candlestick:

High High
Upper Wick/
Shadow
Close Open

Real Body Candle Range

Open Close
Lower Wick/
Shadow
Low Low

Bullish Candle Bearish Candle

Open Price: The open price depicts the first price traded during the formation of the
new candle.
High Price: The top of the upper wick/shadow indicates the highest price traded
during the period.
Low Price: The bottom of the lower wick/shadow indicates the lowest price traded
during the period.
Close Price: The close price is the last price traded during the period of the candle
formation.

Body:
 Bullish (up) candle: If the closing price is higher than the opening price, the
body is typically colored green or white.
 Bearish (down) candle: If the closing price is lower than the opening price, the
body is typically colored red or black.

Wicks (Shadows):
 Upper wick: The line above the body that shows the highest price reached
during the period.
 Lower wick: The line below the body that shows the lowest price reached during
the period.

Real Body: The rectangular area between the open and close price. A larger body
indicates more price movement, while a smaller body indicates less movement.

Direction: The direction of the price is indicated by the color of the candlestick. If
the price of the candle is closing above the opening price of the candle, then the
price is moving upwards and the candle would be green.

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Range: The difference between the highest and lowest price of a candle is its range,
could be calculated as (Range = highest point – lowest point).

How to Use Candlestick Patterns in Trading:

01. Confirmation: Candlestick patterns should be confirmed by other technical

indicators or chart patterns. For example, a bullish engulfing pattern may be more
reliable if it coincides with a support level or a positive MACD crossover.
02. Context Matters: The significance of a candlestick pattern depends on where it
occurs. For example, a hammer at the bottom of a downtrend is a strong reversal
signal, but the same hammer in the middle of a range-bound market may not be
as reliable.
03. Volume: Patterns accompanied by high volume are generally more reliable. For
example, a strong bullish engulfing pattern with high volume suggests stronger
buying interest.
04. Risk Management: Always use proper risk management, like placing stop-loss
orders, as candlestick patterns, though helpful, do not guarantee market
movements.

Candlestick patterns are a key tool in technical analysis that helps traders
understand market sentiment, identify potential trend reversals, and make informed
decisions. By recognizing these patterns and understanding the context in which
they occur, traders can gain insights into market psychology and anticipate future
price movements. However, candlestick patterns should not be used in isolation—it's
important to combine them with other technical indicators for better decision-making.

Candlestick Patterns

Candlestick patterns are typically grouped into two categories:

 Bullish patterns (suggest a price rise)

 Bearish patterns (suggest a price decline)
These patterns are formed when several candlesticks appear in a specific sequence
on a chart, and their significance is based on their position relative to the trend and
the prior price action.

The patterns consists two types. One is Single (one Candle) Candlestick Pattern and
another is Complex (two or more Candles) Candlesticks Patterns.

They are:

01. Single Candlestick Patterns

02. Two-Candles Patterns
03. Three-Candles Patterns
04. Four or more Candles Patterns

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 Single Candlestick Patterns
(Pin Bar)
The Pin Bar candlestick pattern is a powerful reversal signal commonly used in
technical analysis. It is a type of candlestick that has a small body and a long wick
(or shadow), often in one direction, which shows a sharp rejection of price
movement. The shape of the Pin Bar resembles a pin or an arrow, and it typically
indicates a potential price reversal.

Examples: Hammer, Hanging Man, Inverted Hammer, Shooting Star, Doji, Spinning
Top etc.

Key Characteristics of a Pin Bar:

Small Body: The body (the distance between the open and close) of the candlestick
is small, indicating little price movement during that period.

Long Wick (Shadow): The wick (or tail) is much longer than the body, showing that
the price moved significantly in one direction, but then reversed and closed near the
opening price.

Clear Rejection: The long wick indicates rejection or reversal of price movement,
suggesting that the market was pushed in one direction but ultimately failed to
maintain that momentum.

Direction of the Wick: The direction of the wick is important

Bullish Pin Bar: The long wick is on the downside (below the body), signaling a
rejection of lower prices and a potential reversal to the upside.

Bearish Pin Bar: The long wick is on the upside (above the body), indicating a
rejection of higher prices and a potential reversal to the downside.

Pin Bar Candlesticks Pattern Variants

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 Hammer and Hanging Man
01. Hammer Candlestick Pattern:

The Hammer candlestick pattern is a bullish reversal pattern in technical analysis

that suggests a potential trend reversal or support level after a downtrend. It is
characterized by a small real body at the top of the trading range and a long lower
shadow, indicating that bears pushed the price lower during the session, but bulls
regained control and drove the price higher by the close.

Pattern Structure:
01. Small Real Body: The body (distance between the open and close prices) is
small, either bullish (green/white) or bearish (red/black) and located near the top
of the candlestick range.
02. Long Lower Shadow: The lower shadow (wick) is at least two to three times the
size of the real body.
03. Little to No Upper Shadow: There is minimal or no upper wick.
04. Occurs After a Downtrend: The pattern is significant only when it appears after
a series of declining prices.
Complexity: Simple
Small or No
Direction: Bullish
Upper Shadow
Type: Reversal
Closing Price Success Rate: 55-65%
High Opening Price Higher Volume: 70-80%

Opening Price Closing Price

Low Bottom
Shadow
2X
3X

Low

Bullish Hammer Hammer Variants (Lenient)

Key Features:
 Trend Context: A hammer is most effective when it appears at the end of a
downtrend.
 Volume: Higher volume during the hammer formation may increase the reliability
of the pattern.

Explanation:
 The long lower shadow indicates that sellers drove the price significantly lower
during the session.
 The strong close near or above the open price suggests that buyers gained
control, potentially signaling the end of the downtrend.
 It reflects a possible support level where buying pressure outweighs selling
pressure.
Example of a Hammer:
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Suppose a stock Open at BDT 100, Low: BDT 95, High: BDT102 and Closed: BDT
100.

Hammer

Entry Level
Low of the hammer may be able to retest

Stop Loss
Hammer Candlestick Chart Pattern
The lower shadow is BDT 5 (difference between 100 and BDT95). The real body is
only BDT 2 (difference between BDT 100 and BDT 102), located near the top.

Confirmation:
 However, confirmation is usually needed. The next candle should be a bullish
candlestick (e.g., a strong green candle) to confirm that the trend is indeed
reversing.
 A hammer forms when the price opens at one level, drops significantly to form
the long lower shadow, and then closes near the opening price, leaving a small
body at the top of the candlestick. This shows that despite the sellers pushing the
price lower, the buyers regained control by the end of the session

BNICL formed a Hammer Pattern; Dated: 21st October 2024

Trading with the Hammer Pattern:

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01. Location Matters:
 The hammer is most reliable when it appears at key support levels or
after a prolonged downtrend.

02. Confirmation:
 A follow-up bullish candle (preferably with strong volume) is essential for
confirming the reversal.
 Look for a higher close after the hammer to validate the trend change.

03. Entry Points:

 Enter a long position when the price moves above the high of the hammer
candle.
 Use a buy stop order slightly above the hammer’s high.

04. Stop-Loss Placement:

 Place a stop-loss just below the low of the hammer to limit risk in case the
reversal fails.

05. Target Setting:

 Use resistance levels, Fibonacci retracements, or previous price highs
to set profit targets.

While the hammer is a strong indicator, it is most effective when used alongside
other technical analysis tools, such as support/resistance levels, volume analysis,
and confirmation from other patterns or indicators.

02. Hanging Man

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The Hanging Man candlestick pattern is a bearish reversal pattern that typically
forms after an uptrend. It looks very similar to the Hammer candlestick pattern, but
the key difference lies in the trend context also suggesting a shift in sentiment where
sellers begin to dominate. While the Hammer signals a potential reversal from a
downtrend to an uptrend, the Hanging Man signals a potential reversal from an
uptrend to a downtrend.

Pattern Structure:
01. Small Real Body: The real body is small and located near the top of the trading
range, indicating little difference between the open and close prices.
02. Long Lower Shadow: The lower shadow (wick) is at least two to three times the
length of the real body, showing that sellers pushed the price significantly lower
during the session.
03. Minimal Upper Shadow: There is little or no upper shadow, emphasizing the
rejection of lower prices by the end of the session.
04. Occurs After an Uptrend: Hanging Man appears after a strong uptrend and
signals the potential for a trend reversal to the downside.

High High
Close Open
Open Close

Shadow/Wick
2X, 3X of Body
Hanging Man Variants
Complexity: Simple
Direction: Bearish
Low Low Type: Reversal
Hanging Man Candlestick Pattern Success Rate: 50-60%
Higher Volume: 70-80%
Key Features:
 Trend Context: The Hanging Man is a reversal pattern that is most reliable when
it appears at the top of an uptrend.
 Volume: A higher volume during the Hanging Man pattern adds credibility to the
reversal signal.
 Confirmation: Always look for confirmation in the next candle (e.g., a strong
bearish candle).

Explanation:
 The long lower shadow indicates that there was significant selling pressure
during the session, but the close near the opening price suggests the buyers still
had some control.
 The small body indicates indecision in the market, where neither buyers nor
sellers are fully in control.
 When the Hanging Man appears after a strong uptrend, it suggests that the
buyers may be losing momentum, and a reversal to the downside could be
coming.
Example:
Spouse a stock Open: BDT 50, High: BDT 52, Low: BDT 45 and Closed: BDT 51.

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 Stop Loss
Hanging Man
Entry Level

Hanging Man Chart Pattern

The lower shadow is BDT 6 (difference between BDT 51 and BDT 45).The real body
is only BDT 1 (difference between BDT 50 and BDT 51), located near the top. The
pattern forms after an uptrend.

Confirmation:
 The Hanging Man alone does not confirm a bearish reversal.
 It requires confirmation from the following candle, which should be bearish (e.g.,
a close below the Hanging Man's body or shadow).
 Volume: Higher volume during the formation of the Hanging Man can add
strength to the pattern and increase the likelihood of a reversal.

In a typical scenario, the price opens at a certain level, rises during the trading
session, but then falls dramatically, forming a long lower shadow. By the end of the
session, the price closes near the open, leaving a small body at the top of the
candlestick. This suggests that although buyers were initially in control, sellers took
over and pushed the price back down, signaling potential weakness in the uptrend.

Trading the Hanging Man Pattern:

01. Location is Crucial:

 The Hanging Man is most reliable when it forms after a significant uptrend or near
resistance zones.
02. Wait for Confirmation:
 Enter a short position only if the next candle closes below the Hanging Man's real
body or low.
 Confirmation increases the reliability of the signal.
03. Entry Points:
 Enter a short trade when the price falls below the low of the Hanging Man candle.
 Use a sell stop order slightly below the Hanging Man's low.
04. Stop-Loss Placement:
 Place a stop-loss just above the Hanging Man's high to protect against false
signals.
05. Target Setting:
 Use nearby support levels or Fibonacci retracement levels to set profit targets.

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 BNICL formed a Hanging Man Pattern; Dated 15th Jan., 2024

Example in Trading:
Suppose a Stock ABC has been in an uptrend, rising from BDT 100 to BDT 150
over several weeks.
A Hanging Man forms with: Open: BDT 148, High: BDT 151, Low: BDT 140 and
Close: BDT 149

Steps:
01. Wait for the next candle to confirm the bearish reversal (e.g., a close below BDT
140).
02. Enter a short position when the price drops below BDT 140 (sell stop order).
03. Place a stop-loss above BDT 151 (Hanging Man's high).
04. Set a profit target at a previous support level, e.g., BDT 130.

Complementary Tools:
 Indicators: Combine with RSI or Stochastic to identify overbought conditions,
increasing the likelihood of a reversal.
 Trend lines & Fibonacci Levels: Align the Hanging Man with key resistance
zones for a stronger signal.
 Volume Analysis: A Hanging Man with high volume indicates stronger selling
pressure.

By combining the Hanging Man with other technical tools and adhering to proper risk
management, traders can improve their ability to anticipate potential market
reversals.
In summary, while the Hammer appears in downtrends and suggests a bullish
reversal, the Hanging Man appears in up trends and signals a bearish reversal.

Hanging Man vs. Hammer

The Hammer and Hanging Man patterns look very similar. The key difference lies in
their context:
 Hammer: Appears after a downtrend and signals a potential bullish reversal.
 Hanging Man: Appears after an uptrend and signals a potential bearish
reversal.

Both patterns have a small body at the top and a long lower shadow, but their
location in the trend determines their meaning.

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 03. Inverted Hammer (Opposite Hammer Pattern)

The Inverted Hammer Candlestick Pattern is a single candlestick formation that

can signal a potential bullish reversal or a trend reversal to the upside. It typically
appears at the bottom of a downtrend, indicating that buyers may be starting to
gain control over the market after a period of selling pressure.

Pattern Structure:
01. Small Body: The real body of the candlestick is small, typically located near the
lower end of the trading range.

02. Long Upper Shadow: The upper shadow (the line above the body) is at least
twice (2x, 3X) the length of the real body. These long upper shadow shows
that the price rallied significantly during the session but then retraced, closing
near the opening price.

03. Little or No Lower Shadow: The lower shadow is either very short or
nonexistent. This indicates that the price did not fall far during the trading
session, and the market found support near the opening price.

04. Bullish Signal: The formation suggests that despite a period of selling (prior to
the candle), buyers were able to push the price higher during the session,
signaling a potential shift in momentum toward a bullish reversal.

High High Complexity: Simple

Direction: Bullish
Long Upper Type: Reversal
2X
Shadow indicates Success Rate: 50-55%
3X buyers failed to Higher Volume: 65-75%
push up price

Close Open
Open Close
Low Low

Inverted Hammer
Inverted Hammer Variants

Key Features:
 Trend Context: The Inverted Hammer is a bullish reversal pattern that appears
after a downtrend. It suggests a shift in market sentiment from bearish to bullish.
 Volume: Higher volume can increase the reliability of the pattern. The Inverted
Hammer with confirmation from a strong bullish candlestick with high volume is
more significant.
 Confirmation: Always look for confirmation in the next candle (e.g., a strong
bullish candle) to confirm that the trend is reversing to the upside.

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Explanation:
 Upper shadow: The long upper shadow signifies that buyers pushed the price up
significantly during the session. However, the price ultimately pulled back, and
the close was near the open. This shows that, although the buyers attempted to
take control, the sellers still had enough strength to bring the price back down,
but the fact that buyers managed to push the price up earlier suggests that they
may be gaining strength.
 Small body: The small body indicates indecision in the market, showing that
neither the bulls nor the bears have full control.
 Potential for reversal: The Inverted Hammer after a downtrend suggests that
buyers may be starting to gain strength, and the downtrend could be coming to
an end, potentially signaling the beginning of an uptrend.

Inverted Hammer

Entry Level

Stop Loss
Inverted Hammer Chart Pattern

 Confirmation: The Inverted Hammer by itself is not always a strong signal, as

the candlestick shows only a single moment in time. For it to be a more reliable
reversal signal, it is generally recommended to wait for a confirmation candle
(usually a bullish candle that closes higher than the Inverted Hammer’s high) in
the following session.

DSEX Index formed an Inverted Hammer Pattern; Dated: 12th Jun 2024
Example:
 In the formation of an Inverted Hammer, the price might open at a certain level,
fall significantly during the session (creating the lower part of the candlestick),
then rally strongly, creating a long upper shadow. By the close of the session, the
price is near the opening price, forming a small body near the bottom of the
candlestick.

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Confirmation:

 Next candle: A confirmation candle, typically a strong bullish candle, is needed

to validate the Inverted Hammer. The next candlestick should ideally close higher
than the Inverted Hammer’s close to confirm the reversal.

 Volume: Higher volume during the formation of the Inverted Hammer may
increase the reliability of the pattern. If the volume is also high during the next
bullish candle, the reversal signal is stronger.

In summary, the Inverted Hammer is a candlestick pattern that appears in a

downtrend and suggests the possibility of a bullish reversal, but it requires
confirmation from subsequent price action to increase its reliability.

04. Shooting Star

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The Shooting Star is a bearish reversal candlestick pattern that appears after an
uptrend. It signals potential price reversal and indicates that buying pressure may be
weakening, potentially leading to a trend reversal or price decline. The shooting star
pattern is characterized by a small real body, a long upper shadow, and little or no
lower shadow, reflecting a significant rejection of higher prices during the trading
session.

Pattern Structure:
01. Small Real Body: The body of the candlestick is typically small, often at the
lower end of the trading range. It shows that the opening and closing prices are
close to each other.
02. Long Upper Shadow: The upper shadow is long, typically at least twice the
length of the real body, indicating that the price surged higher during the session
but was unable to maintain those levels.
03. Little or No Lower Shadow: The lower shadow is either very small or
nonexistent, suggesting that the price didn’t fall much during the session after the
initial rise.
04. Location: The Shooting Star forms after an uptrend, signaling that the bullish
momentum might be losing strength and that a reversal to the downside could be
imminent.

High High Complexity: Simple

Direction: Bearish
Long Upper Type: Reversal
2X Shadow indicates Success Rate: 50-60%
buyers failed to Higher Volume: 65-75%
3X push up price

Close Open
Open Close
Low Low

Shooting Star Pattern

Shooting Star Variants

Key Features:
 Trend Context: The Shooting Star is a bearish reversal pattern that appears
after an uptrend, signaling that the uptrend could be losing momentum and a
downtrend might follow.
 Volume: Higher volume can make the pattern more significant. If the next
candlestick confirms the reversal with strong volume, the pattern is more reliable.
 Confirmation: Always look for confirmation in the next candlestick (e.g., a strong
bearish candle) to confirm the reversal.

Long Upper Shadow: The upper shadow should be at least twice the length of the
real body, showing that prices attempted to go higher but failed.

Stop Loss
Shooting Star
Entry Level 13 | P a g e
Little or No Lower Shadow: The lower shadow is either very small or nonexistent,
indicating that the price did not fall significantly during the session.

Explanation:
 The shooting star suggests that, despite the price opening low and rising sharply,
the sellers eventually took control of the market, pushing prices down and closing
near the open. This indicates that the buyers’ strength is weakening, and a
bearish reversal could be on the horizon.

Confirmation: For the pattern to be considered valid, it is important to wait for

 A bearish candle (a red or black candlestick) following the shooting star on the
next day confirms the reversal signal.
 If the next candlestick closes below the low of the shooting star, it strengthens the
signal that the price is likely to fall.

DSEX Index formed a Shooting Star Pattern; Dated: 24 Sep., 2024

Confirmation:
 Next candle: A bearish candlestick (such as a strong red candle) following the
Shooting Star is needed for confirmation. The next candle should ideally close
lower than the Shooting Stars close to confirm the reversal.
 Volume: Higher volume during the formation of the Shooting Star and in the
subsequent bearish candle adds strength to the reversal signal.

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Example of How to Use the Shooting Star:

01. Trend Reversal: A shooting star at the top of an uptrend could suggest that the
price is likely to reverse and begin a downtrend.

02. Bearish Confirmation: After identifying a shooting star, wait for confirmation (a
red candlestick) that closes below the low of the shooting star to signal a potential
short entry or a bearish trend.

Example of Trading the Shooting Star:

 If a Shooting Star appears after an uptrend, and the next candlestick confirms
the reversal (closes lower than the shooting star's low), traders might enter a
short position.
 Alternatively, traders may decide to sell their long positions if they believe the
price will decline.

Limitations:

 False Signals: Like many candlestick patterns, the shooting star can sometimes
produce false signals, especially if the trend is very strong or if confirmation is not
provided.
 Context Matters: The shooting star's effectiveness depends on its location in the
trend. If it appears after a strong uptrend, it is more likely to signal a reversal, but
if it appears during a consolidation or range-bound market, it may not be as
reliable.

Example of a Shooting Star Chart Pattern:

 Uptrend: Prices rise steadily, creating a bullish trend.
 Shooting Star Candle: A small real body forms near the top of the trend, with a
long upper shadow and a small lower shadow.
 Confirmation: A bearish candlestick follows, closing below the low of the
shooting star, confirming the reversal.

The Shooting Star is a powerful candlestick pattern that helps traders spot potential
trend reversals in the market. It is most reliable when it appears after an uptrend,
indicating that the bullish momentum might be weakening.
However, confirmation from the following candlestick is crucial to avoid false signals.
As with all technical analysis tools, it's important to use the shooting star in
conjunction with other indicators and chart patterns to increase the likelihood of
success in trading decisions.

05. Doji Candlestick Pattern

Doji (dо̄ ji) is a Japani word which means ‘Error’ .The Doji candlestick pattern is
one of the most well-known and important candlestick formations in technical
analysis. It represents indecision in the market, showing that neither the bulls
(buyers) nor the bears (sellers) are in control. The Doji has a small real body,

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indicating that the opening and closing prices are very close to each other, while the
upper and lower shadows can vary in length. Doji can be Reversal or Continuation.

Key Features of the Doji Candlestick:

01. Small Real Body:

 The body of the candlestick is very small; often a thin line is indicating that
the opening and closing prices are close or equal.
02. Long Shadows:
 A Doji typically has long upper and lower shadows, showing that the price
moved significantly during the session but ultimately closed near the
opening price.
03. Indecision:
 The small real body and long shadows represent indecision in the market
—buyers and sellers both tried to push the price higher and lower but were
unable to maintain control, leading to a balanced or neutral outcome.

2X

3X

Doji Candlestick Pattern

Example: Suppose a stock opens at BDT 50 and Closed BDT 50 or 50.10 or 50.20
or Opens BDT 50 and Closed 50 or 49.90 or 49.80. In this case it will consider as a
Doji Candlestick Pattern.

Types of Doji Candlestick Patterns:

Doji Candlestick Patterns are of six main types including Gravestone Doji, Dragonfly
Doiji, Standard Doji, Long – Legged Doji, 4-Price Doji and Neutral Doji. The Doji can
appear in several variations, each providing subtle differences in interpretation based
on the length and positioning of its shadows.

01. Dragonfly Doji:

Characteristics: The candlestick has a small body near the top, with a long lower
shadow and little to no upper shadow.
Interpretation: Appears after a downtrend, indicating that the price was pushed
lower during the session but ultimately closed near the opening price. This can be
seen as a potential bullish reversal signal if confirmed by subsequent price action.

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02. Gravestone Doji:
Characteristics: The candlestick has a small body near the bottom, with a long
upper shadow and little to no lower shadow.
Interpretation: Appears after an uptrend, indicating that the price was pushed
higher during the session but ultimately closed near the opening price. This can be
seen as a potential bearish reversal signal if confirmed by subsequent price action.

03. Standard Doji (Neutral Doji):

Characteristics: The open and close are almost the same, with long upper and
lower shadows.
Interpretation: This is a neutral signal of indecision, showing that the market
couldn’t make a clear decision in one direction.

04. Long-Legged Doji:

Characteristics: Has long upper and lower shadows, much longer than the body.

Explanation of Doji Candlestick Pattern:

This is a strong sign of market indecision. A long-legged Doji typically appears when
there is significant volatility, with prices testing both the highs and lows but ultimately
closing near the opening price.
Different Types of Doji Candlesticks Patterns:

Dragonfly Gravestone
Doji Doji
Doji
Candlestick
Patterns

4-Price Long-Legged
Doji Doji

Standard/Neutral
Doji
01. Dragonfly Doji

The Dragonfly Doji is a candlestick pattern that signals indecision or potential

reversal in the market. Its appearance depends on the context within a trend. This
pattern suggests that sellers were in control during the session but were
overpowered by buyers toward the end, resulting in the price closing near the
opening level. It is often viewed as a bullish reversal signal when found in a
downtrend, though confirmation is needed.

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Pattern Structure:
01. Open, Low, and Close at the Same Price (or Near the Same Price):
The Dragonfly Doji's open, low, and close prices are nearly identical, forming a
"T" shape.
02. Long Lower Shadow:
A defining feature is its long lower shadow, which indicates that sellers dominated
early in the session, pushing prices down significantly, but buyers regained
control, driving the price back up to close at or near the opening level.
03. No (or Very Minimal) Upper Shadow:
The lack of an upper shadow reinforces that the price couldn't move much above
the opening level.
Complexity: Simple
Direction: Bullish
Type: Reversal
Success Rate: 50-60%
Higher Volume: 65-75%

Dragonfly Doji

Key Features:
 Bears control the early session, causing prices to drop significantly.
 Bulls step in strongly, reversing the drop and pushing the price back to the
opening level.

Explanation:
 In a Downtrend (Bullish Reversal Signal):
The pattern suggests that selling pressure may be waning, and buyers are
stepping in. A bullish confirmation candle (e.g., a strong green candle closing
above the Dragonfly Doji) strengthens the reversal signal.

 In an Uptrend (Indecision or Potential Reversal):

When the Dragonfly Doji appears in an uptrend, it may signal hesitation or even a
bearish reversal if followed by a bearish confirmation.

Imagine a stock in downtrend. The long lower shadow shows that sellers initially
dominated the market, pushing prices lower. However, the small real body at the
top and the lack of an upper shadow suggest that the buyers came in strong and
rejected lower prices, ultimately causing the price to close near its opening level.

Suppose Day 1: The price opens at BDT 50, drops to BDT 45, but rallies to close
back at BDT 50, forming a Dragonfly Doji.

Dragonfly Doji

Entry Level
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Stop Loss

Dragonfly Doji Chart Pattern

This shift in momentum from sellers to buyers could indicate the beginning of a
bullish reversal, especially if the Dragonfly Doji is followed by further bullish
candlesticks or price action. Suppose Day 2: The next candle closes above BDT 50,
confirming the bullish reversal.

Conformation:
01. Bullish Reversal Confirmation:
In a downtrend, wait for the next candlestick to close above the Dragonfly Doji's
high to confirm the bullish reversal.
02. Stop-Loss Placement:
Place a stop-loss slightly below the low of the Dragonfly Doji to manage risk.
03. Volume Consideration:
Higher volume during the Dragonfly Doji’s formation strengthens its reliability.

Example of a Dragonfly Doji:

Imagine a chart where the price has been trending downward for several days. On
the latest session, the price opens at a certain level, falls significantly lower (creating
a long lower shadow), but then buyers push the price back up to close near the
opening price, creating a Dragonfly Doji.

Crystal Insurance formed a Dragonfly Doji; Dated: 10th Aug 2023

 Selling Pressure Fades: The long lower shadow indicates that sellers were in
control for part of the session, but the buyers eventually took over and rejected
the lower prices.
 Bullish Potential: If the next candlestick is bullish (closing above the high of the
Dragonfly Doji), it confirms that the buyers are now in control and a reversal to
the upside may be occurring.

Dragonfly Doji vs. Gravestone Doji

Dragonfly Doji:

 Appears after a downtrend, signaling potential bullish reversal.

 Long lower shadow (sellers pushed prices down, but buyers took control).

19 | P a g e
 No or very small upper shadow (buyers pushed prices up from the lows).

Gravestone Doji:

 Appears after an uptrend, signaling potential bearish reversal.

 Long upper shadow (buyers pushed prices up, but sellers took control).
 No or very small lower shadow (price did not fall much during the session).

Limitations of the Dragonfly Doji:

01. False Signals:

 The Dragonfly Doji is not always a reliable signal of reversal on its own. It can
lead to false signals, especially in a choppy or range-bound market.

02. Requires Confirmation:

 The pattern is not definitive by itself. Traders should wait for confirmation from the
next candlestick to validate the bullish reversal. Without confirmation, the pattern
could be a false signal.
03. Context Matters:
 The effectiveness of the Dragonfly Doji increases when it appears after a strong
downtrend. In a sideways market or after minimal price movement, the pattern
may not be as significant.

The Dragonfly Doji is a candlestick pattern that appears after a downtrend,

signaling potential bullish reversal. It indicates a shift in market sentiment from
selling to buying; with buyers rejecting lower prices and pushing the price back up.
However, it is important to wait for confirmation (e.g., a bullish candlestick following
the Dragonfly Doji) to validate the reversal signal. As with all technical patterns, the
Dragonfly Doji should be used in conjunction with other indicators and analysis tools
for more reliable trading decisions.

02. Gravestone Doji

The Gravestone Doji is a type of candlestick pattern that signals a potential bearish
reversal in the market, especially after an uptrend. It is a variant of the Doji
candlestick that appears when the price moves significantly higher during the
session but closes near the opening price. The pattern is characterized by a small
real body near the bottom of the candlestick and a long upper shadow, with little to
no lower shadow.

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Pattern Structure:
01. Open, High, and Close at the Same Price (or Near the Same Price)
The Gravestone Doji's opening, high, and closing prices are virtually the same,
forming a "T" shape.
02. Long Upper Shadow:
A prominent feature of this pattern is a long upper shadow, which indicates that
buyers pushed the price higher during the session but were unable to sustain
those levels. Sellers then brought the price back down to close near or at the
open.
03. No (or Very Minimal) Lower Shadow:
The lack of a lower shadow reinforces that the price couldn't fall below the
opening level.

Gravestone Doji
2X

3X
Complexity: Simple
Direction: Bearish
Type: Reversal
Success Rate: 50-60%
Higher Volume: 65-75%

Gravestone Doji
Key Features:
 Bulls dominate the early part of the session, driving the price upward.
 Bears then gain control, erasing the bullish gains, and the price closes at or near
its open.

Explanation:
 In an Uptrend: When it appears during an uptrend, the Gravestone Doji suggests
that the buying momentum is weakening, and a reversal to the downside might
occur.
Confirmation of this bearish signal is needed in the form of a lower close on the
following candle.
 In a Downtrend: It may indicate indecision rather than a strong bearish
continuation.
 Indecision and Reversal Signal: The Gravestone Doji is a sign of indecision in
the market. The fact that the price was pushed higher and then rejected is
indicative of a shift in momentum from buyers to sellers. If this pattern appears
after a sustained uptrend, it often suggests a weakening bullish trend and a
potential reversal to the downside.
 Confirmation is Key: The Gravestone Doji alone is not a definitive signal. It
requires confirmation from subsequent price action. Traders typically wait for a
bearish candlestick (a red or black candle) to follow the Gravestone Doji. If the
price closes below the low of the Gravestone Doji, it strengthens the bearish
reversal signal.

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This pattern suggests that buyer exhaustion may be occurring, as the price failed to
sustain the rally. Suppose Day 1: The price opens at BDT 50, surges to BDT 55, but
closes back at BDT 50, forming a Gravestone Doji.

Stop Loss
Gravestone Doji

Entry Level

Gravestone Doji Chart Pattern

It is often seen as a bearish reversal signal, meaning that the trend may soon
change direction from bullish to bearish. Suppose Day 2: The next candle closes
below BDT 50, confirming the bearish reversal.

Conformation:

01. Bearish Reversal Confirmation: Wait for the next candlestick to close below the
Gravestone Doji's low to confirm the reversal.
02. Volume Consideration: High trading volume during the Gravestone Doji's
formation adds weight to its significance.
03. Stop-Loss Placement: For short trades, place a stop-loss slightly above the high
of the Gravestone Doji.
Bullish Momentum Weakens: The long upper shadow indicates that the buyers
attempted to push prices higher but were met with resistance from sellers, who took
control by the end of the session.

DSEX index formed a Gravestone Doji; Dated: 7th May, 2024

Bearish Reversal: If the next candlestick closes lower than the low of the
Gravestone Doji, it suggests that sellers have gained control, and the price may
begin to decline, confirming the reversal.

22 | P a g e
Gravestone Doji vs. Dragonfly Doji:

 Gravestone Doji: Appears at the top of an uptrend and signals a potential

bearish reversal. The long upper shadow indicates that the price was rejected
from higher levels, and sellers gained control.

 Dragonfly Doji: Appears at the bottom of a downtrend and signals a potential

bullish reversal. The long lower shadow indicates that the price was rejected from
lower levels, and buyers gained control.

Limitations of the Gravestone Doji:

01. False Signals: As with any candlestick pattern, the Gravestone Doji can produce
false signals, particularly in a choppy or sideways market where the trend lacks
clear direction.

02. Requires Confirmation: The Gravestone Doji alone is not sufficient for making
trading decisions. Confirmation from subsequent candlesticks is essential for
validating the reversal signal.

03. Market Context: The pattern's significance is higher when it appears in a strong
uptrend. In a weak or range-bound market, the Gravestone Doji might not lead to
a reversal.

The Gravestone Doji is a powerful candlestick pattern that signals bearish reversal
after an uptrend. It represents a shift in market sentiment, where buyers attempt to
push prices higher but are ultimately overpowered by sellers. This candlestick
pattern requires confirmation from subsequent price action (a bearish follow-up
candlestick) to validate the reversal. Traders should be cautious and wait for
confirmation before acting on the Gravestone Doji, and it is most effective when
combined with other technical indicators or chart patterns.

06. Spinning Top Candlestick Pattern

The Spinning Top candlestick pattern is a single-candle formation that represents

market indecision. It is characterized by a small real body (the difference between
the open and close prices) with long upper and lower shadows. This pattern typically
suggests a balance between buyers and sellers, where neither side gains significant
control, signaling uncertainty about the future direction of the market.
Pattern Structure:

01. Small Real Body:

The real body of a Spinning Top is small. This means the difference between the
opening and closing price is relatively small, indicating that neither buyers nor sellers
had full control over the session. The small body is typically located in the middle of
the candlestick, indicating a balance between buying and selling forces.

02. Long Upper and Lower Shadows:

23 | P a g e
The candlestick has long upper and lower shadows, showing that the price
fluctuated significantly during the session. Both buyers and sellers were active,
pushing the price higher and lower, but ultimately neither side managed to close at
the extremes.
The longer the shadows are more significant the indecision in the market. A Spinning
Top with very long shadows can indicate greater market volatility.

03. Indecision or Balance:

A Spinning Top suggests uncertainty in the market. While the price may have
moved up and down during the session, the fact that the opening and closing prices
are close to each other shows that there was no clear winner (no dominant buyers or
sellers).
High High

2X

3X
Close Open
Open Close

Low Low
Bullish and Bearish
Spinning Top
Key Features:
 Buyers push the price higher, and sellers push it lower (or vice versa).
 The market closes near the opening price, reflecting indecision or lack of strong
momentum.
Explanation:
Market Indecision:
The Spinning Top signifies that neither buyers nor sellers have a strong advantage.
This often happens after a strong directional move, suggesting potential for a pause
or reversal.

Context is Key:
 In an Uptrend: It may indicate that the bullish momentum is weakening,
potentially leading to a reversal or consolidation.
 In a Downtrend: It suggests selling pressure may be subsiding, hinting at a
possible reversal or pause.

They are two types:

01. Bullish Spinning Top Stop Loss
02. Bearish Spinning Top
Stop Loss
Entry Level
Entry Level

24 | P a g e
 01. Bullish Spinning Top

A Bullish Spinning Top candlestick pattern represents market indecision but with a
slight tilt toward bullish momentum, especially when it appears after a downtrend. It
is characterized by a small real body and long upper and lower shadows, with a
closing price slightly above the opening price.
Structure of the Pattern:
01. Small Green Body:
The candlestick's body is green (or white), indicating that the closing price is
slightly higher than the opening price.
02. Long Upper and Lower Shadows:
Significant wicks on both sides show price movement in both directions during
the session, reflecting indecision between buyers and sellers.
03. Location in a Downtrend:
When found in a downtrend, the Bullish Spinning Top suggests that selling
pressure is weakening, and buyers are stepping in, potentially signaling a
reversal.
Complexity: Simple
Direction: Bullish
Type: Reversal
Success Rate: 50-65%
Higher Volume: 65-70%

Bullish Spinning Top

Key Features:
 The price fluctuates significantly during the session but closes slightly higher than
the opening price.
 This pattern emerges during a downtrend or after a sharp decline, indicating a
possible shift in sentiment.
Imagine a stock in a downtrend. Day 1: The price opens at BDT 50, moves as low as
BDT 45, as high as BDT 55, and closes at BDT 51, forming a Bullish Spinning Top.

Stop Loss

Entry Level

Bullish Spinning Top Chart Pattern

Day 2: A strong green candle closes above BDT 55, confirming a bullish reversal.

25 | P a g e
Explanation:
 Market Indecision with a Bullish Bias:
The small green body suggests that while neither buyers nor sellers dominated,
the session ended with slight bullish momentum.

 Reversal Potential:
In a downtrend, the Bullish Spinning Top can indicate that the downward
momentum is weakening, and a reversal might be imminent.

Crystal Insurance formed a Spinning Bottom; 29th October 2024

Confirmation:
01. Wait for Confirmation:
 A bullish confirmation candle (e.g., a strong green candle closing above the
high of the Bullish Spinning Top) is essential to confirm the reversal.
 Without confirmation, the pattern could signal continuation rather than reversal.
02. Volume Consideration:
Higher volume during the Bullish Spinning Top’s formation adds strength to its
reversal signal.
03. Risk Management:
 For bullish trades, place a stop-loss just below the low of the Bullish Spinning Top
to manage downside risk.
02. Bearish Spinning Top

The Bearish Spinning Top candlestick pattern reflects market indecision with a
bearish bias. It is characterized by a small real body (red or black) and long upper
and lower shadows. When it appears in an uptrend, it may signal a potential
reversal or a loss of bullish momentum.

Pattern Structure:

01. Small Red Body:

 The candlestick's real body is red (or black), indicating that the closing price is
slightly lower than the opening price.
 This suggests a slight bearish bias despite the market's indecision.
02. Long Upper and Lower Shadows:
 The shadows are of significant length, showing price movement in both directions
during the session.
 The equal wicks emphasize that neither buyers nor sellers dominated.
03. Location in an Uptrend:

26 | P a g e
 A Bearish Spinning Top is most meaningful when it appears after an uptrend,
signaling a potential reversal.
Complexity: Simple
Direction: Bearish
Type: Reversal
Success Rate: 50-60%
Higher Volume: 65-70%

Bearish Spinning Top

Imagine a stock in an uptrend. Day 1: The price opens at BDT 50, moves as high as
BDT 55, drops to BDT 48, and closes at BDT 49.50, forming a Bearish Spinning Top.

Stop Loss

Entry Level

Bearish Spinning Top Chart Pattern

Day 2: The next candlestick closes below BDT 48, confirming a bearish reversal.

Key Features:
The Bearish Spinning Top forms when:
 Buyers push the price higher, and sellers push it lower (or vice versa).
 Ultimately, the session ends with a slight bearish bias, as the closing price is just
below the opening price.

Explanation:
 Market Indecision with a Bearish Tilt:
The small red body indicates that while neither buyers nor sellers gained a
decisive advantage, the sellers had the upper hand by session’s end.
 Reversal Potential:
When found at the top of an uptrend, it signals weakening bullish momentum and
the potential for a bearish reversal.
 Continuation Possibility:
In a downtrend, the Bearish Spinning Top may suggest continued selling
pressure.

27 | P a g e
 Crysta
l Insurance formed a Spinning Top; Dated: 03 September, 2024

Confirmation:

01. Wait for Confirmation:

The Bearish Spinning Top alone is not enough to confirm a reversal. Look for the
next candlestick to confirm bearish momentum:
 A bearish follow-up candle closing below the low of the Spinning Top
strengthens the reversal signal.
 A bullish follow-up candle invalidates the bearish bias.
02. Risk Management:

 For bearish trades, place a stop-loss above the high of the Bearish Spinning Top
to limit risk.
03. Volume Consideration:
Higher trading volume during the Bearish Spinning Top’s formation adds weight
to its bearish implications.

Key Differences from Other Patterns:

 Unlike the Shooting Star, which has a long upper shadow and no lower shadow,
the Bearish Spinning Top has long shadows on both sides.
 It reflects more indecision than a strong rejection of higher prices.

Bearish Spinning Top (after an Uptrend):

 Appearance: A small real body nears the top of the candlestick, with long
shadows.
 Interpretation: This pattern occurs after a strong uptrend and suggests that the
price moved higher during the session but faced selling pressure, as seen in the
long lower shadow. The close near the open indicates indecision, but there is
potential for a bearish reversal if the next candlestick is bearish.
 Significance: A Bearish Spinning Top at the top of an uptrend indicates that the
buying pressure is weakening and that a reversal to the downside might occur.

28 | P a g e
Interpretation of the Spinning Top Candlestick:

 Indecision: The Spinning Top is a neutral pattern that shows a battle between
buyers and sellers. The small real body means neither side managed to control
the price by the close, while the long shadows suggest that both sides were
active. This pattern reflects indecision in the market.

Potential Reversal or Continuation:

 The Spinning Top by itself does not indicate a specific direction for the market.
It may signal either a continuation of the current trend or a potential reversal,
depending on the surrounding price action and trend context.

 In an uptrend: A Spinning Top may signal that the upward momentum is

weakening and a reversal or pause might be imminent.

 In a downtrend: Similarly, a Spinning Top in a downtrend could suggest that

selling pressure is diminishing, and a reversal or consolidation phase might
occur.

10. Marubozu Candlestick Pattern

The Marubozu candlestick pattern is a single candlestick with a long body and no or
very short wicks, indicating strong market sentiment in one direction. It's a significant
candlestick formation often used in technical analysis to determine the momentum
and trend strength of a financial asset. The term "Marubozu" means "bald" or
"shaven" in Japanese, referring to the candle's appearance, which lacks wicks or
shadows.

Pattern Structure:
01. Long Body: The candle has a long body, which means the open and close
prices are far apart. The longer the body, the stronger the momentum.

29 | P a g e
02. No or Short Shadows (Wicks): There are no or very small wicks at either end of
the candlestick. This suggests that the price moved strongly in one direction
without much opposition.

Marubozu Full Marubozu Open Marubozu Close

There are two types of Marubozu:
01. Bullish Marubozu: A Marubozu with a long body where the open price is at the
low of the period, and the close price is at the high of the period. This indicates
strong buying pressure.
02. Bearish Marubozu: A Marubozu with a long body where the open price is at the
high of the period, and the close price is at the low of the period. This indicates
strong selling pressure.

01. Bullish Marubozu Candlestick Pattern

A Bullish Marubozu is a strong single candlestick pattern that signals powerful

buying pressure and suggests that the price will continue to rise. It is considered one
of the most bullish candlestick patterns in technical analysis.
Pattern Structure:
01. Long Body: The body of the candlestick is long, meaning there is a significant
difference between the open price and the close price.
02. No or Very Small Upper and Lower Shadows (Wicks): The candlestick has
little to no wicks, which means that the opening price is near the low of the
session, and the closing price is near the high. This indicates that buyers were in
control throughout the entire period.
03. Strong Bullish Sentiment: The price moves from the low to the high of the
session, showing that buyers dominated the market from the open to the close.
Imagine a stock: Open: BDT 100; Close: BDT 110; No upper or lower shadows (or
very small shadows).
High
110 Close
Complexity: Simple
Direction: Bullish
Type: Reversal
Success Rate: 60-70%
Higher Volume: 70-80%

Open 100
Low 30 | P a g e

Bullish Marubozu
This indicates that from the moment the market opened, buyers aggressively pushed
the price higher, and there was little to no resistance.
Key Features:
 The open of the candle is at or near the lowest price of the period.
 The close of the candle is at or near the highest price of the period.
 The real body (the difference between open and close) is long, and there are no
or very small wicks on either side of the body.

Explanation:
A Bullish Marubozu indicates that the bulls (buyers) were in control during the
entire time frame (whether it's a 1-minute, 5-minute, daily, or weekly chart). There
was no significant pullback, and the price rose steadily from the opening to the
closing price.

 Strength of the Bullish Trend: The longer the body, the stronger the buying
pressure. A longer bullish Marubozu indicates more confidence and momentum
in the uptrend.
 Market Sentiment: This pattern suggests that investors are optimistic, and the
price is likely to continue rising, at least in the short term.

Bullish Marubozu

Entry Level

Stop Loss
Bullish Marubozu Chart Pattern
DSEX Index formed a bullish Marubozu pattern;
Dated: 06 Aug, 29 Oct & 30th Oct. 2024

Significance and Trading Strategy:

 Trend Confirmation: The Bullish Marubozu is often considered a confirmation of
an uptrend. If it appears in the middle of an existing uptrend, it signals that the
trend may continue.
 Breakout Pattern: It can also appear after a consolidation or a breakout from a
previous resistance level. A Bullish Marubozu here can suggest that the market is
now in a new phase of upward movement.
 Entry Point: Traders may consider entering a long position after the
appearance of a Bullish Marubozu, especially if it follows a period of
consolidation or comes after a breakout of a resistance level.

31 | P a g e
Example:
Let’s say a stock has been consolidating between BDT 98 and BDT 100 for several
days, and then it breaks out above BDT 100. A Bullish Marubozu forms at this
point, with an opening price of BDT100 and a closing price of BDT110. This
suggests that the breakout is genuine, and the price may continue to rise toward new
resistance levels.

Confirming Indicators:
To avoid false signals, traders often use additional technical analysis tools to confirm
the validity of a Bullish Marubozu, such as:
 Volume: Higher volume during the formation of a Bullish Marubozu adds strength
to the pattern.
 Moving Averages: A Bullish Marubozu above a rising moving average (e.g., 50-
day or 200-day) can further confirm the bullish trend.
 RSI or Stochastic Oscillator: These momentum indicators can help confirm
whether the asset is overbought or oversold, providing additional context to the
trade.

The Bullish Marubozu is a powerful pattern that reflects strong buying pressure and
is typically interpreted as a signal for the continuation of an uptrend. It is most
reliable when it appears in the context of an existing bullish trend or breakout.
Traders often use this candlestick in conjunction with other technical indicators for
further confirmation.

02. Bearish Marubozu Candlestick Pattern

The Bearish Marubozu is a single candlestick pattern that signals a strong bearish
sentiment in the market, often indicating that the price will continue to decline. This
candlestick is characterized by a long body with little to no wicks, meaning that
sellers controlled the market throughout the entire trading session.
Key Features of a Bearish Marubozu:

01. Long Body: The body of the candlestick is long, showing a large difference
between the open and close prices, which indicates strong price movement in
one direction (downward in this case).
02. No or Very Short Upper and Lower Shadows (Wicks): The candlestick has
either no wicks or very short wicks at both ends, meaning the open price is at or
near the high of the period, and the close price is at or near the low of the period.
03. Bearish Sentiment: The lack of wicks and the long body suggest that sellers
were in control of the market for the entire period, pushing the price lower from
the opening to the closing price.

Suppose a stock Open: BDT 110, Close: BDT 100; No wicks or very small wicks
at the top and bottom
High

110 Open
Complexity: Simple
32 | P a g e
Direction: Bearish
Type: Reversal
Success Rate: 60-70%
This indicates that sellers pushed the price down from BDT110 all the way to BDT
100 without much resistance, demonstrating strong selling pressure and may
suggest that the price will continue to fall, especially if the stock breaks below
support levels or if other technical indicators align with the pattern.

How to Identify a Bearish Marubozu:

 Open Price: The open of the candlestick is at or near the highest price of the
period.
 Close Price: The close of the candlestick is at or near the lowest price of the
period.
 No or Short Shadows: The candlestick has little to no wicks on either side,
meaning the price moved sharply down without significant retracements.
Explanation:
A Bearish Marubozu suggests that the market sentiment is extremely negative, and
the price is likely to continue moving down, at least in the short term. The key
elements of the pattern (long body and little to no wicks) show that sellers had full
control throughout the trading session and there was no retracement or buying
pressure to reverse the downtrend.
Stop Loss
Bearish Marubozu

Entry Level

Bearish Marubozu Chart Pattern

Key Points to Remember:

 The Bearish Marubozu is a strong bearish signal that suggests continuation of
a downtrend.
 The lack of wicks shows that there was little to no resistance during the session,
making this a very decisive move by the sellers.
 This candlestick is often used to indicate momentum in the market, with the
expectation that prices will continue to fall.

33 | P a g e
 Crystal Insurance formed a bearish Marubozu
Candlestick; Dated: 4th & 5th March, 2024
Trading Strategy:
 Sell Signal: Traders often view the appearance of a Bearish Marubozu as a sell
signal. If it forms after a previous uptrend or near resistance levels, it suggests
that the trend is likely to reverse downward.
 Confirmation: To increase the likelihood of success, traders may wait for
confirmation of the pattern, such as a lower close on the next candlestick or
additional indicators like volume, RSI, or moving averages.
Risk Management:
 Stop Loss: A common way to manage risk when trading a Bearish Marubozu is
to place a stop loss above the high of the candlestick (e.g., above BDT 150 in
the above example). This will protect the trader in case the market moves
unexpectedly in the opposite direction.
 Take Profit: Traders may target support levels or previous lows as potential
take-profit points, as the Bearish Marubozu suggests that the price will likely
continue lower.

The Bearish Marubozu is a powerful bearish candlestick pattern that shows

strong selling pressure and suggests that the price is likely to continue falling. It is
identified by a long body (significant open-to-close range) with little to no wicks at
either end, indicating that sellers controlled the entire trading session. Traders can
use this pattern as a signal to sell, often in conjunction with other technical
indicators, and place stop-loss orders above the high of the Marubozu to manage
risk.

Two Candlestick Pattern

01. Engulfing Candlestick Pattern

The Engulfing candlestick pattern is a widely used and powerful reversal signal in
technical analysis. It consists of two candlesticks, where the second candle
completely engulfs the body of the first candle. The pattern suggests a shift in market
sentiment, indicating a potential reversal of the current trend. There are two types of
Engulfing patterns: Bullish Engulfing and Bearish Engulfing.

Pattern Structure:
01. Two Candlesticks:
 The first candlestick is smaller and represents the current trend (either up or
down).

34 | P a g e
 The second candlestick is larger and completely engulfs the body of the first
candlestick.
02. Engulfing Behavior:
 The body of the second candle (the "engulfing" candle) fully covers the body of
the first candle, from open to close.
 It’s important to note that the "body" refers to the area between the open and
close prices, not the wicks (shadows).

Types of Engulfing Candlestick Patterns:

01. Bullish Engulfing Pattern

02. Bearish Engulfing Pattern

Bullish Engulfing Pattern Bearish Engulfing Pattern

01. Bullish Engulfing Pattern

The Bullish Engulfing Pattern is a popular candlestick chart pattern used in

technical analysis, often signaling a potential reversal to the upside after a
downtrend.

Pattern Structure:
01. Occurrence: Appears at the end of a downtrend, signaling a potential bullish
reversal.
02. Candlesticks Involved: Two candles are needed to form this pattern:
 First Candle: A smaller bearish (red/black) candle indicating a continuation of the
downtrend.
 Second Candle: A larger bullish (green/white) candle that fully engulfs the body
of the first candle (from open to close).
Close of Day 2 Higher than Open of Day 1
Bullish
Bearish Candle
Candle
Complexity: Complex
Close Direction: Bullish
Open Type: Reversal
Day: 01 Bull Rejected Success Rate: 60-70%
Gap Down Higher Volume: 70-80%
Close
Open

35 | P a g e
Gap Down

Bullish Engulfing Pattern

Key Features:
 The open of the second candle is lower than the close of the first candle.
 The close of the second candle is higher than the open of the first candle.
 Shadows (wicks) of the candles are not as significant as the body in confirming
the pattern.
Example:
Imagine a stock in a downtrend; Day 1: Closes at BDT 50 after opening at BDT 52
(bearish candle).

Entry Level

Day 2: Opens at BDT 49 and closes at BDT 54,Stop engulfing

Loss the Day 1 candle
completely. This is a Bullish Engulfing Pattern, suggesting a possible reversal to the
Bullish Engulfing Chart Pattern
upside.
Chart Pattern
Explanation:

 The first candle reflects continued selling pressure.

 The second candle's wide bullish body indicates a surge in buying interest,
suggesting that buyers are regaining control.
Implications:

 The pattern often forecasts a reversal to the upside, particularly if confirmed by

higher trading volumes on the second candle.

 It becomes more significant when found near key support levels or following
extended downtrends.

36 | P a g e
 DSEX Index Formed a Bullish Engulfing Pattern;
Dated 6th August & 29th Oct, 2024

Confirmation:
For stronger validation, traders typically wait for:
 A follow-through bullish candle (third-day confirmation).
 A breakout above resistance or higher volume during the pattern's formation.

Limitations:
 False signals can occur, especially in sideways or choppy markets.
 Should always be used in conjunction with other technical indicators (e.g., RSI,
MACD, or moving averages) for confirmation.

02. Bearish Engulfing Pattern

The Bearish Engulfing Pattern is a significant candlestick pattern in technical

analysis, signaling a potential reversal to the downside after an uptrend.

Pattern Structure:

01. Occurrence: Appears at the end of an uptrend, indicating a potential bearish

reversal.

02. Candlesticks Involved: Two candles form this pattern.

 First Candle: A smaller bullish (green/white) candle indicating continued upward
momentum.
 Second Candle: A larger bearish (red/black) candle that completely engulfs the
body of the first candle (from open to close).

Gap Up

Open
Close
Bear Rejected 37 | P a g e
Day: 01
Gap Up

Open
Close
 Complexity: Complex
Direction: Bearish
Type: Reversal
Success Rate: 60-70%
Higher Volume: 70-80%

Key Features:
 The open of the second candle is higher than the close of the first candle.
 The close of the second candle is lower than the open of the first candle.
 Shadows (wicks) are less significant than the body in confirming the pattern.

Explanation:
 The first candle reflects continued buying pressure.
 The second candle's large bearish body suggests a surge in selling interest,
overwhelming the buyers and signaling that bears are gaining control.

Imagine a stock in an uptrend; Day 1: Opens at BDT 50 and closes at BDT 54

(bullish candle).
Stop Loss

Entry Level

Bearish Engulfing Chart Pattern

Day 2: Opens at BDT 55 and closes at BDT 48, completely engulfing the Day 1
candle. This is a Bearish Engulfing Pattern, suggesting a possible reversal to the
downside.

38 | P a g e
Implications:
 This pattern forecasts a potential reversal to the downside, especially when
confirmed by higher volumes on the second candle.
 It becomes particularly significant if it forms near key resistance levels or
following a prolonged uptrend.

Pharma Aid formed a Bearish Engulfing Pattern; 5th Nov, 2024

Confirmation:
To strengthen the bearish signal, traders typically look for:
 A follow-through bearish candle (third-day confirmation).
 A breakdown below a support level or significant volume accompanying the
pattern.

Limitations:
 False signals can occur, particularly in range-bound or sideways markets.
 Should be combined with other technical tools (e.g., RSI, MACD, or trendlines)
for more reliable confirmation.

02. Kicker Candlestick Pattern

The Kicker Candlestick Pattern is one of the most reliable and powerful reversal
patterns in candlestick charting. It signifies a dramatic shift in market sentiment and
is often accompanied by high trading volume.

Pattern Structure:
01. Occurrence: It can appear in both bullish and bearish forms, signaling a sharp
reversal.
02. Formation: The pattern consists of two candlesticks:
 First Candle: Aligns with the existing trend (either bullish or bearish).
 Second Candle: Opens at or near the previous candle's open but moves strongly
in the opposite direction, "kicking" away from the prior trend.
03. Gap: There is typically no overlap between the first and second candles' bodies,
emphasizing the dramatic change.

39 | P a g e
Types of Kicker:
01. Bullish Kicker Pattern
02. Bearish Kicker Pattern

Bullish Kicker Bearish Kicker

01. Bullish Kicker Pattern

The Bullish Kicker Pattern is a strong candlestick chart pattern that signals a
dramatic reversal to the upside. It is one of the most reliable indicators of a bullish
shift in sentiment, often appearing after a sustained downtrend or during periods of
consolidation.

Pattern Structure:
01. Formation:
 Composed of two candlesticks.
 The first candle is bearish (red/black), reflecting the continuation of the
downtrend.
 The second candle is a strong bullish (green/white) candle that gaps upward
and moves higher, showing a sharp reversal.
02. Gap Between Candles:
 The second candle opens above or near the open of the first candle and does
not overlap with the bearish candle’s body.
 This gap underscores the sudden and strong shift in sentiment.

03. Volume:
 High trading volume on the second candle increases the reliability of the pattern.

Complexity: Complex
Gap Up Direction: Bullish
Gap UP
Showing Sharp Reversal Type: Reversal
Success Rate: 60-70%
Higher Volume: 70-80%

40 | P a g e
Bullish Kicker
Key Features:
 The first bearish candle reflects ongoing selling pressure and continuation of
the downtrend.
 The second bullish candle represents a sharp reversal, often triggered by
significant news or a major catalyst (e.g., earnings reports, policy
announcements).
 Buyers enter the market with strong momentum, overwhelming the selling
pressure.

Suppose a stock is in a downtrend; Day 1: Opens at BDT 50 and closes at BDT 45

(bearish candle).

Entry Level

Stop Loss
Bullish Kicker Chart Pattern

On Day 2: The stock opens at BDT 50 (at or near the previous day’s open, forming a
gap) and closes at BDT 60, creating a strong bullish candle.
This sharp move indicates a dramatic sentiment change, and the stock is likely to
continue upward.
Explanation:
 This pattern signals a strong bullish reversal, often leading to further upside
movement.
 It is particularly powerful if it appears at or near key support levels.

Crystal Insurance formed a Bullish Kicker; 31st October 2024

41 | P a g e
How to Trade the Bullish Kicker:
01. Entry Point:
 Enter a long position after the bullish kicker pattern completes.
 Confirmation can come from follow-through bullish candles or increased volume.
02. Stop Loss:
 Place a stop loss below the low of the second (bullish) candle to limit risk.
03. Target:
 Use resistance levels, Fibonacci extensions, or measured moves to set profit
targets.
Strengthening the Signal:
Look for the pattern near:
 Major support levels or trendlines.
 Oversold conditions in technical indicators like RSI.
A high trading volume on the second candle adds credibility to the pattern.

02. Bearish Kicker Pattern

The Bearish Kicker Pattern is a powerful candlestick chart pattern signaling a

dramatic reversal to the downside. It indicates a sudden shift in market sentiment
from bullish to bearish, often due to major news, unexpected events, or a change in
fundamentals.
Pattern Structure:

01. Formation:
 Composed of two candlesticks.
 The first candle is bullish (green/white), reflecting ongoing upward momentum.
 The second candle is a strong bearish (red/black) candle that gaps downward
and moves lower, marking a sharp reversal.

02. Gap Between Candles:

 The second bearish candle opens below or near the open of the first bullish
candle, with no overlap between their bodies.
 This gap highlights the abrupt change in sentiment.

03. Volume:
 High trading volume on the second candle strengthens the pattern's validity.

Gap Down
Showing Sharp Reversal
Complexity: Complex
Direction: Bearish
Type: Reversal
Gap Down Success Rate: 60-70%
Higher Volume: 70-80%

Bearish Kicker
42 | P a g e
Key Features:
 The first bullish candle reflects buying enthusiasm and continuation of the
uptrend.
 The second bearish candle represents a sudden influx of selling pressure, often
caused by negative catalysts (e.g., bad earnings, policy changes, or
macroeconomic events).
 Sellers dominate the market, overwhelming the buyers.

Suppose a stock is in an uptrend; Day 1: Opens at BDT 90 and closes at BDT 95

(bullish candle).

Stop Loss

Entry Level

Bearish Kicker Chart Pattern

On Day 2: The stock opens at BDT 90 (at or near the previous day’s open, forming a
gap) and closes at BDT 80, creating a strong bearish candle.
This abrupt move signals a major sentiment shift, with sellers taking control.
Explanation:

 This pattern strongly suggests a reversal to the downside, often followed by

continued bearish momentum.

 It’s particularly impactful if it occurs near key resistance levels or after an

overbought condition.

How to Trade the Bearish Kicker:

01. Entry Point:
 Enter a short position after the bearish kicker pattern completes.
 Confirmation can come from follow-through bearish candles or increased volume.
02. Stop Loss:
 Place a stop loss above the high of the second (bearish) candle to limit risk.
03. Target:
 Use support levels, Fibonacci retracements, or measured moves to set profit
targets.

43 | P a g e
 Crystal Insurance Formed a Bearish Kicker; Dated: 20 Jun 2024

Strengthening the Signal:

Look for the pattern near:
 Resistance levels or psychological price zones.
 Overbought conditions in technical indicators like RSI or Stochastic.
A surge in trading volume during the second candle adds credibility.

Limitations:
 The pattern may produce false signals in choppy or range-bound markets.
 Sudden market news driving the reversal may lead to unpredictable volatility.

03. Harami Candlestick Pattern

The Harami Candlestick Pattern is a two-candlestick chart pattern used in technical

analysis to indicate a potential trend reversal or pause in the current market
direction. The term "Harami" comes from the Japanese word for "pregnant,"
reflecting how the smaller second candle is "contained" within the first.

Pattern Structure:
01. Formation:
 Consists of two candles.
 The body of the second candle is entirely within the body of the first candle.
 The shadows (wicks) of the second candle can extend beyond the first candle's
body, but the bodies must not overlap.

02. Types:
 Bullish Harami: Appears during a downtrend and signals a potential bullish
reversal.

44 | P a g e
 Bearish Harami: Appears during an uptrend and signals a potential bearish
reversal.

03. Volume:
 Volume on the second candle can provide confirmation. A lower volume suggests
indecision, while a higher volume indicates stronger conviction for reversal.

Bullish Harami Patterns Bearish Harami Patterns

01. Bullish Harami Candlestick Pattern

The Bullish Harami Candlestick Pattern is a two-candlestick pattern that indicates

a potential reversal to the upside. It is most effective when it appears in a downtrend
or at key support levels.

Pattern Structure:
The pattern consists of two candles:
First Candle: A large bearish (red/black) candle, representing strong selling
pressure and continuation of the downtrend.
Second Candle: A smaller bullish (green/white) or neutral (doji) candle whose body
is completely contained within the body of the first candle.
The second candle often indicates a pause or hesitation in the prevailing downtrend.

Trend Context:
 It appears in a downtrend and suggests the possibility of a trend reversal.
Volume
 Lower volume on the second candle suggests indecision, while higher volume
can strengthen the likelihood of a reversal.
Complexity: Complex
Direction: Bullish
Body Entirely within Day 01 Body
Type: Reversal
Success Rate: 50-60%
Higher Volume: 60-70%

45 | P a g e
Key Features:

 The first candle reflects continued selling pressure, with bears in control.
 The second smaller candle signals that sellers are losing strength, and buyers
may begin to step in, creating the possibility of a bullish reversal.

Explanation:

 The pattern implies a weakening of bearish momentum, as the small bullish

candle shows hesitation among sellers.
 The Bullish Harami pattern hints at a reversal, but confirmation is typically
needed with subsequent price action (e.g., a bullish candle or breakout above
resistance).
 It is more reliable when:
 Found near key support levels or oversold conditions.
 Confirmed by an increase in volume or follow-through bullish price action. It’s
more reliable when confirmed by subsequent price action, such as a higher close
on the next candlestick.

Example of a Bullish Harami:

Imagine a downtrend where the price has been making lower lows. A long bearish
candle appears, followed by a smaller bullish candle that fits entirely within the body
of the bearish candle. This setup suggests that sellers may be losing control, making
way for potential [Link] Day 1: A stock opens at BDT 50, trades lower, and
closes at BDT 45 (large bearish candle).

Entry Level
Stop Loss
Bullish Harami Chart Pattern

46 | P a g e
Day 2: The stock opens at BDT 46 and closes at BDT 47, forming a small bullish
candle that is contained within the Day 1 body. This pattern reflects weakening
bearish momentum, suggesting that buyers may soon gain control.

Confirmation:
01. Confirmation:

 Wait for the next candlestick to confirm the reversal with a close above the high
of the small bullish candle.

02. Entry Point:

 Enter a long position once the confirmation candlestick closes.

03. Stop-Loss:

 Place a stop-loss below the low of the Bullish Harami pattern to manage risk.

04. Target:

 Set a target based on resistance levels, Fibonacci retracements, or previous

swing highs.

BSC formed a Bullish Harami Pattern; Dated: 28th October, 2024

 A third bullish candle breaking above the high of the second candle confirms
the reversal.
 Look for increased volume or additional bullish indicators (e.g., RSI moving out
of oversold territory) to validate the signal.

Strengthening the Signal:

The pattern is more reliable when:
 Found in a downtrend near a key support level or trendline.
 Occurs alongside oversold signals on technical indicators like MACD, RSI or
Stochastic.
 Accompanied by increasing volume on the second candle or the confirmation
candle.

47 | P a g e
 02. Bearish Harami Candlestick Pattern

The Bearish Harami Candlestick Pattern is a two-candlestick chart pattern that

signals a potential reversal to the downside. It is most effective when it appears
during an uptrend or near a resistance level, indicating a possible shift in momentum
from bullish to bearish.

Pattern Structure:

The pattern consists of two candles:

First Candle: A large bullish (green/white) candle, reflecting strong buying
momentum and continuation of the uptrend.
Second Candle: A smaller bearish (red/black) or neutral (doji) candle whose body is
entirely contained within the body of the first candle.
 The second candle indicates hesitation or weakness in the prevailing uptrend.
Volume: Lower volume on the second candle suggests indecision, while higher
volume strengthens the signal of a potential reversal.

Trend Context:
 Appears in an uptrend and suggests the possibility of a reversal.
Complexity: Complex
Body Entirely within Day 02 Body Direction: Bearish
Type: Reversal
Success Rate: 50-60%
Higher Volume: 60-70%

Bearish Harami Patterns Bearish Harami Variants Bearish Harami Cross

Key Features:
 The first bullish candle reflects strong buying interest and continuation of the
uptrend.
 The second smaller candle signals that buyers are losing strength and sellers
may begin to step in, creating the possibility of a bearish reversal.

48 | P a g e
Explanation:
 The Bearish Harami pattern suggests a potential reversal to the downside, but
confirmation is typically needed with subsequent price action (e.g., a bearish
candle or breakdown below support).
 It is more reliable when:
 Found near key resistance levels or overbought conditions.
 Accompanied by increased volume on the following bearish confirmation candle.
Imagine an uptrend where the price is making higher highs. A large bullish candle is
followed by a smaller bearish candle that fits entirely within the body of the bullish
candle. This setup suggests buyers might be losing momentum, and sellers could
take over the control. Suppose Day 1: A stock opens at BDT 90, trades higher, and
closes at BDT100 (large bullish candle).

Stop Loss
Entry Level

Bearish Harami Chart Pattern

Day 2: The stock opens at BDT 99 and closes at BDT 97, forming a small bearish
candle that is contained within the body of the Day 1 candle.
This pattern reflects weakening bullish momentum, suggesting that sellers may soon
take control.
Confirmation:
 A third bearish candle breaking below the low of the second candle confirms
the reversal.
 Look for increased volume or additional bearish indicators (e.g., RSI moving out
of overbought territory) to validate the signal.

DSEX Index formed a bearish Harami Pattern;

Dated: 5th November 2024

Trading the Bearish Harami:

49 | P a g e
01. Entry:
 Enter a short position once the low of the second candle is broken on the
following day.
 Alternatively, wait for a confirmed breakdown below a support level.

02. Stop Loss:

 Place a stop loss above the high of the first candle to limit risk.

03. Target:
 Use support levels, Fibonacci retracements, or previous swing lows to set profit
targets.

04. Piercing Line Candlestick Pattern

The Piercing Line is a bullish reversal candlestick pattern that occurs during a
downtrend, signaling a potential shift from bearish to bullish sentiment. It is a two-
candlestick pattern and is considered a reliable indicator when confirmed by
subsequent price action.

Pattern Structure:

The pattern consists of two Candlesticks:

01. First Candle (Bearish):
 A large bearish candlestick (long red or black body).
 Reflects strong selling pressure and continuation of the downtrend.
02. Second Candle (Bullish):
 A large bullish candlestick (long green or white body).
 Opens below the previous candle’s low (gap down) and closes above the
midpoint of the first candle’s body.
 This "pierces" more than 50% into the body of the first candlestick.
03. Trend Context: The pattern must occur after a significant downtrend to be
meaningful.
 Gap: The gap down between the first candle's close and the second candle's
open underscores the initial bearish momentum.
The second candle closing above the midpoint of the first candle suggests that bulls are
regaining control.

50 | P a g e
 Complexity: Complex
50% Direction: Bullish
Closes above the 50%
Level level of the First Candle Type: Reversal
Success Rate: 50-60%
Opens below the Higher Volume: 60-75%
First Candle
Gap Down

Piercing Line Candlestick

Pattern

Key Features:

 The first bearish candle reflects strong selling pressure and continuation of the
downtrend.

 The gap down at the open of the second candle initially signals further bearish
sentiment.

 The strong bullish close above the midpoint of the first candle highlights a
significant shift in sentiment, with buyers stepping in forcefully.

Explanation:

 The Piercing Line pattern suggests a potential bullish reversal, especially when
confirmed by subsequent price action (e.g., another bullish candle or a breakout
above resistance).

 It is more reliable when:

 Occurs after a prolonged downtrend or at key support levels.

 Accompanied by higher trading volume on the second candle.

Imagine a downtrend where the price is consistently making lower lows. A long
bearish candlestick is followed by a bullish candlestick that gaps down at the open
but closes well into the body of the first candle, piercing more than halfway through.
This suggests a potential reversal as buyers gain strength. Suppose Day 1: A stock
opens at BDT 50, trades lower, and closes at BDT 45 (large bearish candle).

Entry Level

Stop Loss
51 | P a g e
Piercing Line Chart Patterns
Day 2: The stock opens at BDT43 (gap down) but rallies to close at BDT 48, above
the midpoint of the first candle.

This pattern reflects a shift in momentum from sellers to buyers, indicating a potential
reversal.
Trading Strategy with piercing pattern:

01. Confirmation: Wait for the next candlestick to confirm the reversal, ideally
closing above the high of the Piercing Line pattern.
02. Entry Point: Enter a long position after confirmation of the reversal (e.g., on a
break above the second candle’s high).
03. A third bullish candle breaking above the high of the second candle provides
confirmation of the reversal.
04. Increased trading volume on the second or third candle adds credibility.

05. Stop-Loss: Place a stop-loss below the low of the Piercing Line pattern to limit
risk.
06. Target: Set a target based on resistance levels, Fibonacci retracements, or
previous swing highs.

Crystal Insurance formed a Piercing Pattern Dated: 29th October 2024

Strengthening the Signal:

The pattern is more reliable when:

 Found near major support levels or oversold conditions in technical

indicators like RSI or Stochastic.
 Accompanied by increasing volume during the second candle.
 Occurs within the context of broader market or sector strength.

05. Dark Cloud Cover (DCC)

52 | P a g e
The Dark Cloud Cover candlestick pattern is a bearish reversal pattern that
typically forms after an upward trend. The pattern consists of a lengthy bullish
candle followed by a long bearish candle that opens above the previous candle’s
high.
It is commonly used in technical analysis to identify selling opportunities. This pattern
typically occurs at the top of an uptrend and consists of two candles. The second
candle, however, closes below the previous candle’s midpoint, indicating a shift in
market sentiment from optimistic to negative.

Pattern Structure:
The pattern consists of two candles:
01. First Candle: A large bullish (green/white) candle, indicating strong upward
buying momentum.
02. Second Candle: A large bearish (red/black) candle that:
 Gap up Opening: The second candle must open above the high of the first
candle.
 Close below Midpoint: The closing price of the second candle should fall below
the midpoint of the first candle's real body.
 Volume Confirmation: Higher trading volume on the second candle can add
significance to the pattern.

The second candle's close below the midpoint of the first candle signifies a shift in
control from buyers to sellers.

Gap Up

Opens above the Complexity: Complex

First Candle
Direction: Bearish
50% Type: Reversal
Closes below the 50% Success Rate: 50-60%
Level level of the First Candle
Higher Volume: 60-75%

Dark Cloud Cover (DCC)

Key Features:

 The first bullish candle reflects continued buying enthusiasm in an uptrend.

 The gap up at the open of the second candle initially signals optimism, but the
subsequent bearish close indicates a sudden shift in sentiment.
 The strong bearish close below the midpoint of the first candle suggests that
sellers are taking control, potentially leading to a downward move.

Imagine an uptrend where the price is consistently making higher highs lows. A long
bullish candlestick is followed by a bearish candlestick that gaps down. Suppose
Day1 A stock opens at BDT 90, trades higher, and closes at BDT100 (large bullish
candle).
Stop Loss

Entry Level

53 | P a g e
The stock opens at BDT105 (gap up) but sells off to close at BDT95, below the
midpoint of the first candle.
This pattern reflects a shift in momentum from buyers to sellers, indicating potential
for a bearish reversal.

Explanation:
 The Dark Cloud Cover indicates that selling pressure has overcome the buying
pressure of the prior session. This suggests that the bullish trend might be
reversing, and a bearish trend could be starting.
 Traders often use this pattern in conjunction with other technical indicators (like
RSI, MACD, or moving averages) for confirmation.
 The Dark Cloud Cover pattern is a warning of a potential trend reversal to the
downside, especially when confirmed by subsequent bearish price action.
It is more reliable when
 Found after a prolonged uptrend or at key resistance levels.
 Accompanied by higher trading volume on the second candle.
 A third bearish candle breaking below the low of the second candle confirms
the reversal. Increased trading volume on the second or third candle strengthens
the signal.

54 | P a g e
 DSEX index Formed a DCC; Dated: 12th August 2024
Limitations:

 The Dark Cloud Cover pattern is not always a definitive signal of reversal. It
requires confirmation, such as a follow-up bearish candle or other technical
indicators.
 In a strong uptrend, the pattern might fail as the bullish momentum can resume.

06. Tweezer Candlestick Pattern

The Tweezer Candlestick Pattern is a reversal candlestick pattern that typically

signals a change in market direction. It consists of two candlesticks with matching
highs or lows and is commonly found at the end of a trend, indicating a potential
reversal in the opposite direction.

Types of Tweezer Patterns:

01. Tweezer Bottoms (Bullish Reversal)
02. Tweezer Tops (Bearish Reversal)

Equal High for

Both Candles

Equal Low for

Both Candles
Tweezer Bottoms Tweezer Tops

01. Tweezer Bottoms Candlestick

The Tweezer Bottoms is a bullish reversal candlestick pattern that appears at the
end of a downtrend, signaling a potential shift in momentum to the upside. It is the

55 | P a g e
counterpart to the Tweezer Tops pattern. This pattern consists of two consecutive
candlesticks with nearly identical lows, indicating strong support at that price level.

Pattern Structure:
01. Two Candlesticks:
 The first candle is typically bearish (red or black), reflecting downward price
movement.
 The second candle is bullish (green or white), reflecting a reversal in sentiment. A
large bullish (green/white) candle with the same low as the first candle, showing
that the sellers' momentum has stalled and buyers are stepping in.
02. Equal Lows:
 Both candlesticks have nearly the same or very close low prices, suggesting that
the downtrend is encountering strong support.
03. Trend Context:
 The pattern must appear during a downtrend for it to be meaningful as a potential
reversal signal.
04. Bullish Signal:
 The first bearish candle shows the dominance of the sellers, but the second
bullish candle at the same low indicates that the sellers' strength is fading, and
the buyers are starting to take control.

05. Volume:
 Increased volume on the second candle (the bullish one) helps confirm the
reversal, but volume is not a strict requirement.

_____ ____________________________________
Tweezer Bottoms Candlestick Variants
(Equal Low)

Complexity: Complex
Direction: Bullish
Type: Reversal
Success Rate: 50-60%
Key Features: Higher Volume: 60-75%

 The equal lows suggest that the bears attempted to push prices lower but failed
due to strong buying interest at the support level.
 The bullish second candle reinforces the notion that buyers are gaining control,
potentially signaling the end of the downtrend.

Explanation:
 First Candle (Bearish): The first candle indicates strong bearish activity, as the
market is in a downtrend and sellers are in control.

56 | P a g e
 Second Candle (Bullish): The second candle opens lower (continuing the
downtrend) but closes higher, with the same low as the first candle. This
suggests that the sellers were unable to push the price lower, and the buyers are
starting to regain control, signaling a possible trend reversal.

Suppose a stock is in a downtrend, reaching a low of Day 1: A stock opens at BDT 50,
trades lower, and closes at BDT45 (bearish candle). This shows that although the sellers
tried to push the price lower, they failed, and the buyers are now in control.

Entry Level

Stop Loss

Tweezer Bottoms Chart Patterns

Day 2: The stock opens at BDT 44 but rallies to close at BDT 48, forming a bullish
candle with the same low of BDT45.
This pattern indicates that despite the selling pressure on Day 1, the market failed to
push prices lower, and buyers stepped in on Day 2, driving the price higher. This
suggests a potential bullish reversal.

Trading the Tweezer Bottoms Pattern:

01. Entry:

 Enter a long position after the second candle closes, especially if there is
confirmation with a break above the high of the second candle or key resistance.

02. Stop Loss:

 Place a stop loss just below the low of the first candle (the matching low), as this
level could act as support.

03. Target:

 Set profit targets based on resistance levels, previous swing highs, or Fibonacci
retracement levels.

57 | P a g e
 Crystal Insurance formed a Tweezer Bottom Pattern;
Dated: 15th June 2023

Limitations:
 The Tweezer Bottoms pattern is more reliable when confirmed by additional
indicators, such as RSI showing oversold conditions or divergence.
 It is less effective in a strong downtrend where momentum can override the
bullish signal.
 Not all Tweezer Bottoms patterns result in reversals, so confirmation from
subsequent price action or other technical tools is essential.

02. Tweezer Tops Candlestick Pattern

The Tweezer Tops is a bearish reversal candlestick pattern that appears at the end
of an uptrend, signaling a potential shift in momentum to the downside. This pattern
is characterized by two consecutive candlesticks with almost identical highs,
indicating strong resistance at that price level, indicating that the bulls are losing
control.

Pattern Structure:
01. Two Candlesticks:
 The first candle is typically bullish (green or white), reflecting an upward price
movement.
 The second candle is bearish (red or black), reflecting a reversal in sentiment.

02. Equal Highs:

 Both candlesticks have nearly the same or very close high prices, suggesting that
the uptrend is encountering significant resistance.

03. Bearish Signal:

 While the first candle shows strength in the uptrend, the second candle suggests
that the momentum has stalled, and the market is likely to reverse direction.

04. Volume:
 Increased volume during the formation of the second candle (the bearish one)
strengthens the reversal signal. However, volume is not a strict requirement.

58 | P a g e
05. Trend Context:
 The pattern must appear during an uptrend for it to be meaningful as a potential
reversal signal.

Tweezer Tops Candlestick Variants

(Equal High)
____________________________________________

Complexity: Complex
Direction: Bearish
Type: Reversal
Success Rate: 50-60%
Higher Volume: 60-70%
Key Features:
 The equal highs suggest that the bulls attempted to push prices higher but failed
due to strong selling pressure at the resistance level.
 The bearish second candle reinforces the notion that sellers are gaining control,
potentially signaling the end of the uptrend.

Explanation:
 First Candle (Bullish): The first candle shows strong bullish activity, as the
market is in an uptrend and buyers are in control.
 Second Candle (Bearish): The second candle opens higher (indicating
continuation of the bullish trend), but it closes lower, with the same high as the
first candle. This suggests that the buyers tried to push prices higher but failed,
and the bears may now be taking control.
 A third bearish candle that closes below the low of the second candle would
provide confirmation of the reversal.
 Alternatively, confirmation may come from other technical indicators or patterns,
such as a breakdown below a key support level, or if the market shows signs of
oversold conditions.

Suppose a stock is trading in an uptrend and hits a resistance level opens at BDT
100, trades higher, and closes at BDT 110 (bullish candle).

Stop Loss
Entry Level

Tweezer Tops Chart Patterns

59 | P a g e
Day 2: The stock opens at BDT 110 but closes at BDT 105, forming a bearish candle
with the same high of BDT 110.
This pattern indicates that, although the bulls were able to push the price higher
initially, they lost momentum by the close of the second day, and the bears may now
be taking control.
How to Identify and Trade Tweezer Tops:

01. Identification:
 Look for two consecutive candles with nearly identical highs during an uptrend.
 The second candle should ideally close lower than the first, indicating bearish
sentiment.
02. Entry Point:
 Consider entering a short position when the price breaks below the low of the
second candle.
03. Stop Loss:
 Place a stop-loss above the high of the tweezer tops to limit potential losses if the
resistance level breaks.
04. Take Profit:
 Set profit targets using nearby support levels, moving averages, or Fibonacci
retracement levels.

Crystal Insurance formed a Tweezer Top Pattern;

Dated: 30th May, 2023

Limitations:
 The Tweezer Tops pattern is more reliable when supported by additional
indicators, such as RSI showing overbought conditions or divergence.
 It is less effective in a strong uptrend where momentum can override the bearish
signal.
 Not all Tweezer Tops patterns result in reversals, so confirmation from
subsequent price action or other technical tools is essential.

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 Three-Candlesticks Patterns
01. Morning Star Candlesticks Patterns
The Morning Star candlestick pattern is a bullish reversal pattern that typically forms
at the end of a downtrend, signaling a potential shift in momentum to the upside. It
consists of three candles and is highly regarded in technical analysis as a strong
indicator of a trend reversal.

Pattern Structure:
01. First Candle (Bearish):
 A long bearish candlestick that reflects strong selling pressure and continuation
of the downtrend.
02. Second Candle (Indecision):
 A small-bodied candlestick (either bullish or bearish, or a doji) that indicates
indecision or a potential pause in the market's downward momentum.
 This candle usually gaps down from the first candle, emphasizing the market's
initial bearish sentiment.

03. Third Candle (Bullish):

 A long bullish candlestick that closes well into the body of the first candle,
signaling that buyers are taking control.
Day 01
Day 03

50% Close above 50%

Level of First Candle

Gap Up
Complexity: Complex
Direction: Bullish
Gap Down
or Type: Reversal
Success Rate: 60-70%
Day 02 Higher Volume: 70-80%
Morning Star Candlesticks Patterns

Key Features:
 Trend Context: The pattern must appear during a downtrend.
 Gap: The second candle gaps down, creating visual separation, which enhances
the pattern's significance.
 Volume Confirmation: Higher volume on the third candle can confirm the
reversal.
Explanation:
 The pattern suggests that selling pressure is weakening, and buyers are starting
to take control.
 The second candle’s indecision highlights a battle between bulls and bears.
 The third candle confirms the bullish sentiment as it closes strongly.

The Morning Star pattern signifies a shift from bearish to bullish sentiment.

61 | P a g e
 Entry Level

Stop Loss
Morning Star Chart Patterns

Traders interpret this as an indication that the downtrend is likely over and a new
uptrend may begin.

How to Trade the Morning Star Pattern:

01. Identification:
 Ensure the pattern forms at the end of a downtrend.
 Confirm that the third candle's close penetrates at least halfway into the first
candle’s body.
02. Entry Point:
 Consider entering a long position after the third candle closes, or when the price
breaks above the high of the third candle.

03. Stop Loss:

 Place a stop-loss below the low of the second candle (or the entire pattern) to
limit potential losses.

04. Take Profit:

 Use resistance levels, moving averages, or Fibonacci retracement levels to set
profit targets.

62 | P a g e
 DSEX Index formed a Morning Star Pattern; Dated 9th October 2023

02. Evening Star Candlestick Pattern

The Evening Star is a bearish reversal candlestick pattern that typically occurs at
the top of an uptrend, signaling a potential shift in market sentiment from bullish to
bearish. It consists of three candles and indicates that selling pressure might
outweigh buying momentum. It is the opposite of the Morning Star and typically
appears at the top of an uptrend.

Pattern Structure:
01. First Candle (Bullish Candle):
 A long bullish candle that continues the existing uptrend.
 It indicates strong buying pressure.
02. Second Candle (Star Candle):
 A small-bodied candle (can be bearish, bullish, or a Doji).
 It opens with a gap up from the previous candle.
 This candle reflects indecision in the market, as neither buyers nor sellers
dominate.
 It usually gaps up from the first candle, showing initial bullish sentiment.
03. Third Candle (Bearish):
 A long bearish candle, confirming the reversal.
 This candle typically closes below the midpoint of the first candle, signaling a shift
in momentum to the downside.
Gap Up

Gap Down
Day 02 Complexity: Complex
Close below 50% Direction: Bearish
50%
Level of First Candle Type: Reversal
Success Rate: 60-70%
Higher Volume: 70-80%

Day 01
Day 03

Evening Star Candlesticks Patterns

Key Features:

Location: Must appear after an established uptrend. The pattern is stronger if it

forms near a key resistance level or after a prolonged uptrend.
Gap: The second candle should gap up from the first, and the third candle should
gap down from the second.
 Volume: Increased volume on the third candle strengthens the signal.
 Confirmation: The third candle should close below the midpoint of the first
bullish candle.
 Stop Loss: Consider placing a stop loss above the high of the pattern to manage
risk.

63 | P a g e
Explanation:
 The pattern suggests that buying pressure is weakening, and sellers are starting
to gain control.
 The second candle’s indecision highlights a battle between bulls and bears.
 The third candle confirms the bearish sentiment as it closes strongly.

Imagine a bullish uptrend forming higher highs and higher lows. An Evening Star
pattern emerges, showing the following:
01. A strong green candle.
02. A small, indecisive candle gapping up.

Stop Loss

Entry Level

Evening Star Chart Patterns

03. A large red candle is gapping down and closing deep into the green candle's
body.

GPH Isphat formed an Evening Star Pattern; Dated: 13th May, 2024

Trading Strategy:

Significance: The pattern suggests that buyers are losing control and sellers are
gaining momentum.
01. Entry Point: Traders often enter a short position after the completion of the third
candle.
02. Stop Loss: Placed above the high of the second (star) candle or the first candle.
03. Take Profit: Can be determined based on support levels or other technical
indicators.

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 03. The Abandoned Baby Candlestick Pattern

The Abandoned Baby is a rare but highly reliable candlestick pattern that signals a
potential reversal. It can be either bullish or bearish, depending on its position in the
trend. This pattern typically appears at the end of a strong uptrend (bearish reversal)
or downtrend (bullish reversal).

Types of Abandoned Baby:

01. Bullish Abandoned Baby (Reversal from Downtrend)
02. Bearish Abandoned Baby (Reversal from Uptrend)

Bullish and Bearish Abandoned Baby Candlestick Patterns

01. Bullish Abandoned Baby (Reversal from Downtrend)

The Bullish Abandoned Baby is a rare and strong reversal candlestick pattern that
typically forms after a sustained downtrend. It signals a potential shift from bearish to
bullish momentum.

Key Features:

01. First Candle (Bearish):

 A long red (bearish) candlestick that represents strong selling pressure.
 Indicates the continuation of the existing downtrend.
02. Second Candle (Doji or Small Candle):
 A doji or a small-bodied candlestick that gaps down from the first candle.
 It reflects indecision or equilibrium between buyers and sellers.
 The gap ensures no overlap with the first or third candles, emphasizing the
"abandoned" nature.
03. Third Candle (Bullish):
 A long green (bullish) candlestick that gaps up from the second candle.
 It closes strongly higher, confirming the reversal as buyers take control.

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 Day 01
Day 03

Level
50% of First Candle
Close above 50%
Complexity: Complex
Direction: Bullish
Type: Reversal
Gap Up
Gap Down
Success Rate: 60-70%
Day 02 Higher Volume: 70-80%

Bullish Abandoned Baby

Explanation:

 The pattern suggests that bearish momentum has exhausted, and bulls are
stepping in to drive prices higher.
 The gaps (both down before the doji and up before the bullish candle) highlight a
significant change in market sentiment.

Entry Level

Stop Loss
Bullish Abandoned Baby Chart Patterns

Trading Strategy:

01. Confirmation: Wait for the price to break above the high of the third candle to
confirm the pattern.
02. Entry: Enter a long position after the third candle closes, or when the price
surpasses its high.
03. Stop Loss: Place a stop loss below the low of the second candle (the doji or
small-bodied candle).
04. Target: Use prior resistance levels, Fibonacci retracements, or measured moves
to set profit targets.
05. Volume: High trading volume on the third candle strengthens the pattern's
reliability.

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 Crystal Insurance formed a Bullish Abandoned Baby
Pattern; Date: 31st July 2022

02. Bearish Abandoned Baby (Reversal from Uptrend)

The Bearish Abandoned Baby is a rare and reliable reversal candlestick pattern
that signals a shift from bullish to bearish momentum. It typically forms after a strong
uptrend and indicates the beginning of a downtrend.

Pattern Structure:
01. First Candle (Bullish):
 A long green (bullish) candlestick that reflects strong buying pressure.
 Represents the continuation of the existing uptrend.

02. Second Candle (Doji or Small Candle):

 A doji or small-bodied candlestick that gaps up from the first candle.
 The absence of overlap between the first and second candle emphasizes
indecision in the market.
 This candle reflects a lack of follow-through buying and a balance between
buyers and sellers.

03. Third Candle (Bearish):

 A long red (bearish) candlestick that gaps down from the second candle.
 This candle closes strongly downward, confirming that sellers have taken control.

Day 02
Complexity: Complex
Gap Up Direction: Bearish
Gap Down Type: Reversal
Success Rate: 60-70%
Level Higher Volume: 70-80%
50% of First Candle
Close below 50%

Day 01 Day 03

Bearish Abandoned Baby Patterns 67 | P a g e

Key Features:

The Bearish Abandoned Baby pattern is considered highly reliable due to its clear
structure and the strong shift in market sentiment it represents. However, traders
should use it in conjunction with other technical indicators for confirmation

Explanation:
 The pattern shows that after a strong uptrend, buyers lose momentum (indicated
by the doji or small candle), and sellers take over, causing a significant reversal.
 The gaps on either side of the middle candle (upward before and downward after)
indicate a dramatic shift in sentiment.
Stop Loss

Entry Level

Bearish Abandoned Baby Chart Patterns

Trading Strategy:

01. Confirmation: Wait for the price to break below the low of the third (bearish)
candle to confirm the pattern.
02. Entry: Enter a short position once the third candle closes or when the price falls
below its low.
03. Stop Loss: Place a stop loss above the high of the second candle (doji or small-
bodied candle).
04. Profit Target: Use previous support levels, Fibonacci retracements, or measured
moves to set a target.
05. Volume: High trading volume on the third candle increases the reliability of the
pattern.

Sonali Paper Formed a bearish abandoned baby

Pattern; Dated: 8th July 2024

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 04. Three Inside Up & Down Candlestick Pattern

The inside Candlestick Pattern is a reversal candlestick pattern that signals a

potential shift in market direction.

They are two types:

01. Three inside up
02. Three inside down candlestick pattern

01. The Three Inside Up

The Three Inside Up candlestick pattern is a bullish reversal pattern that suggests a
potential change in trend from bearish to bullish. It consists of three candles and
often forms after a downtrend.

Pattern Structure:
01. First Candle: A large bearish candle (long body) that continues the current
downtrend.
02. Second Candle: A smaller bullish candle that forms within the body of the first
candle (indicating hesitation in the downtrend). Ideally, it should close at least
above the midpoint of the first candle.
03. Third Candle: A strong bullish candle that closes above the first candle's high,
confirming the reversal.
Day 3
Day 1
Close above the first Complexity: Complex
Candle's high
Direction: Bullish
50% Type: Reversal
Level Close above the 50%
Level of the first Candle Success Rate: 55-65%
Higher Volume: 65-75%
Day 2
Three Inside Up Candlestick Patterns

Key Features:
 Volume: Higher volume on the third candle strengthens the reliability of the
pattern.
 Market Context: Look for the pattern near key support levels or oversold
conditions for a stronger signal.
 Timeframes: Works best on higher timeframes (daily, 4-hour, etc.) for more
reliable results.

Explanation:
 Bearish Exhaustion: The first candle shows strong selling pressure.
 Buyer Interest: The second candle signals buyers entering the market, reducing
the selling momentum.
 Reversal Confirmation: The third candle confirms that buyers have taken
control, indicating a potential upward trend.

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 Entry Level

Stop Loss
Three Inside Up Chart Patterns

Trading Strategy:
01. Entry Point: Consider entering a long position after the third candle closes above
the first candle’s high.
02. Stop Loss: Place a stop loss below the lowest point of the pattern (usually the
low of the first candle).
03. Take Profit: Use resistance levels, Fibonacci retracement levels, or a risk-reward
ratio to set a target.

Crystal Insurance formed 3 inside up pattern; Dated: 29th October 2024

02. Three Inside Down Candlestick Pattern

The Three Inside Down candlestick pattern is a bearish reversal pattern that
suggests a potential shift from an uptrend to a downtrend. It consists of three
candles and typically appears after an uptrend.

Pattern Structure:
01. First Candle: A large bullish candle (long body) that reflects the strength of the
prior uptrend.
02. Second Candle: A smaller bearish candle that forms within the body of the first
candle. Ideally, it should close below the midpoint of the first candle.

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03. Third Candle: A strong bearish candle that closes below the low of the first
candle, confirming the reversal.

Day 2
Close below the 50%
50% Level of the first Candle Complexity: Complex
Level
Direction: Bearish
Close below the first Type: Reversal
Candle's Low Success Rate: 55-65%
Day 1 Higher Volume: 65-75%
Day 3
Three Inside Down Candlestick Pattern

Key Features:

 Volume: Higher volume on the third candle strengthens the pattern’s reliability.
 Market Context: Look for the pattern near key resistance levels or overbought
conditions for stronger signals.
 Timeframes: Like the Three inside up, this pattern is more reliable on higher
timeframes (daily, 4-hour, etc.).

Explanation:
 Bullish Weakness: The first candle shows strong upward momentum.
 Seller Emergence: The second candle indicates sellers entering the market,
weakening the bullish push.
 Reversal Confirmation: The third candle confirms that sellers have taken
control, signaling a potential downtrend.
Stop Loss

Entry Level

Patterns
Three Inside Down Chart

Trading Strategy:

01. Entry Point: Consider entering a short position after the third candle closes
below the low of the first candle.
02. Stop Loss: Place a stop loss above the high of the first candle to limit risk.
03. Take Profit: Use support levels, Fibonacci retracement levels, or a risk-reward
ratio to determine exit points.

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 Crystal Insurance formed three inside down
pattern; dated: 20th Jun 2024

The three inside up and three inside down patterns are similar in pattern and
different in nature. Both patterns indicate trend reversal and are used by traders
extensively. The adoption of more and more technical tools will make the use of the
pattern more efficient.
Difference between three inside up and three inside down.

Three Inside Up Three Inside Down

01. Appears at the end of downtrends 01. Appears at the end of uptrends
02. Begins with a long bearish 02. Begins with a long bullish
candlestick candlestick
03. Pattern ends with a bullish 03. Pattern ends with a bearish
candlestick candlestick
[Link] signals a bullish reversal 04. Pattern signals a bearish reversal
05. Pattern denotes buyers entry and 04. Pattern denotes buyers exit and
sellers exit sellers entry

05. Three White Soldiers Candlestick Pattern

The Three White Soldiers candlestick pattern is a bullish reversal pattern that
indicates a strong shift from bearish to bullish momentum. It typically forms after a
downtrend or a period of market consolidation.

Pattern Structure:
01. Three Consecutive Bullish Candles: Each candle is bullish (green or white,
depending on the chart colors) and closes higher than the previous candle.

02. Small to No Wicks: The candles ideally have small or no upper wicks, indicating
that bulls maintained control throughout the session.

03. Steady Growth:

 The bodies of the candles should be long and consistent, showing steady buying
pressure.
 Each candle opens within or near the previous candle's body and closes higher.

72 | P a g e
04. Volume: Increased trading volume during the formation strengthens the pattern's
reliability.

Complexity: Complex
Three White Soldiers Candlestick Pattern Direction: Bullish
Type: Reversal
Success Rate: 60-70%
Key Features: Higher Volume: 70-80%

 The first candle shakes off the bearish sentiment.

 The second candle draws in new buyers as confidence in a reversal grows.
 The third candle confirms the dominance of buyers and often attracts more participants,
fueling the bullish trend.

Explanation:
The pattern suggests that after a downtrend or consolidation, buyers have taken
over and are driving prices higher in a controlled and sustained manner. It indicates
strong bullish sentiment and is often followed by continued upward momentum.
The pattern can fail if it appears in overbought conditions or near strong resistance.

Entry Level

Stop Loss
Three White Soldiers Chart
It’s essential to confirm with other technical indicators or chart patterns.
Patterns
Confirmation:
01. Trend Context:

 The pattern is most reliable when it appears after a sustained downtrend or a

significant support level.

73 | P a g e
02. Confirmation:

 Look for additional indicators or resistance breakouts to confirm the continuation

of the uptrend.
03. Entry Point:

 Enter a long position after the third candle closes, or when the price surpasses
the high of the third candle.
04. Stop Loss:

 Place a stop loss below the low of the first candle to manage risk.
05. Volume:

 Higher volume during the pattern formation adds credibility to the bullish reversal.

Crystal Insurance formed 3 white soldiers pattern dated: 29th October 2024

06. Three Black Crows

The Three Black Crows candlestick pattern is a bearish reversal pattern that signals
a potential shift from bullish to bearish momentum. It typically forms after an uptrend
or near a resistance level.
Pattern Structure:

01. Three Consecutive Bearish Candles:

 Each candle is bearish (red or black, depending on the chart colors) and closes
lower than the previous candle.
02. Small to No Wicks:
 The candles ideally have small or no lower wicks, showing that bears maintained
control throughout the session.
03. Steady Decline:

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 The bodies of the candles are long and consistent, indicating strong selling
pressure.
 Each candle opens within or near the previous candle’s body and closes lower.
04. Volume:
 Increased trading volume during the pattern formation strengthens its reliability.

Complexity: Complex
Direction: Bearish
Type: Reversal
Success Rate: 60-70%
Higher Volume: 70-80%

Three Black Crows Candlestick Pattern

Key Features:
 The first candle suggests a loss of bullish control as selling pressure begins to
dominate.
 The second candle convinces more traders that a bearish reversal may be
underway.
 The third candle confirms the strength of the bears, as buyers are unable to
counteract the selling pressure.

Explanation:
The pattern suggests that after an uptrend or a period of consolidation, sellers have
taken over and are driving prices lower in a controlled and sustained manner. It
indicates strong bearish sentiment and is often followed by continued downward
momentum.
Stop Loss

Entry Level

Three Black Crows Chart Patterns

Confirmation and Trading:

01. Trend Context:

75 | P a g e
 The pattern is most reliable when it appears after a sustained uptrend or near a
significant resistance level.
02. Confirmation:
 Look for additional indicators, such as a support level breakdown or bearish
divergence, to confirm the continuation of the downtrend.

03. Entry Point:

 Enter a short position after the third candle closes, or when the price breaks
below the low of the third candle.

04. Stop Loss:

 Place a stop loss above the high of the first candle to manage risk.
05. Volume:
 Higher volume during the pattern formation adds credibility to the bearish
reversal.

Crystal Insurance formed three black crows pattern; dated: 20th June 2024

Potential Pitfalls:
 The pattern may fail if it forms near oversold conditions or strong support levels.
 Confirm the pattern with other technical indicators to avoid false signals.

07. Three Line Strike

The Three Line Strike is a powerful bullish and bearish reversal candlestick
pattern that appears after an up and downtrend. It consists of four candles and is
known for its potential to signal a strong upward or downward price movement once
the pattern completes.

There are two types:

01. Bullish Three Line Strike
02. Bearish Three Line Strike

Strike Strike
Candle Candle
3
2 1
1 2
3
76 | P a g e
 01. Bullish Three Line Strike

The Bullish Three Line Strike is a strong bullish reversal candlestick pattern that
signals a potential reversal after a downtrend. It consists of four candles, and its
formation suggests that sellers' momentum has been exhausted and buyers are
taking control.

Pattern Structure:
01. First Three Candles (Bullish):
 Three consecutive bullish candles (green or white), each closing higher than
the previous one, forming a strong uptrend.
 The candles reflect sustained buying pressure.
02. Fourth Candle (Bearish):
 A long bearish candle (red or black) that:
 Opens within the body of the third bullish candle.
 Closes well below the low of the first three candles.
 This candle "strikes" through the previous bullish candles, signaling a reversal
and that selling pressure is now dominating.

03. Volume:
 Ideally, the fourth candle should have higher volume compared to the previous
three candles, which strengthens the reliability of the reversal signal.
Strike
Candle
3
2
1 Complexity: Complex
Direction: Bullish
Type: Reversal
Success Rate: 55-65%
Higher Volume: 65-75%
Bullish Three Line Strike
Explanation:
 The bearish fourth candle may look like a reversal signal at first, but it’s
interpreted as a temporary pullback.
 The strong downward move often shakes out weaker hands while larger
buyers are preparing to push prices higher.
 Traders expect a continuation of the uptrend after this brief correction.
Key Features:

77 | P a g e
 Volume: Higher volume on the fourth candle might signal profit-taking rather than
a reversal.
 Support Levels: If the pullback respects key support levels, the continuation is
more likely.
 Fifth Candle: A bullish fifth candle closing above the fourth candle's close strengthens
the signal for trend continuation.

Entry Level

Stop Loss

Bullish Three Line Strike Chart Pattern

Trading Strategy:

01. Trend Context:

 The Bullish Three Line Strike is most effective after a downtrend, especially when
formed near support levels or at the end of a consolidation period.
02. Entry Point:
 Once the fourth candle closes, traders can enter a long position, particularly if the
price breaks above the high of the fourth candle.
 Alternatively, enter when the price breaks above the high of the third bearish
candle after the fourth candle.
03. Stop Loss:
 A stop loss can be placed below the low of the third candle to limit risk.
04. Volume Confirmation:
 Ensure that the fourth bullish candle has high volume to add credibility to the
pattern. Higher volume on the fourth candle increases the likelihood of the
reversal continuing.

78 | P a g e
 Crystal Insurance formed Bullish three line strike; dated: 28th October 2024

The Bullish Three Line Strike suggests that the uptrend remains intact, and the
sharp pullback is a temporary retracement. It offers a potential buying opportunity for
traders expecting the trend to resume.

02. Bearish Three Line Strike

The Bearish Three Line Strike is a strong bearish reversal candlestick pattern that
typically signals a potential shift from an uptrend to a downtrend. This pattern forms
after a strong uptrend, indicating that buyers' momentum has been exhausted, and
sellers are now taking control.

Pattern Structure:
01. First Three Candles (Bearish):
 Three consecutive bearish candles (typically red or black) form a strong
downtrend.
 Each of these candles closes lower than the previous one, indicating continuous
selling pressure.

02. Fourth Candle (Bullish):

 A long bullish candle (green or white) that
 Opens within the body of the third bearish candle.
 Closes well above the close of the first three candles.
 The fourth candle "strikes" through the previous bearish candles, overpowering
them and signaling a shift in market sentiment.

03. Volume:
 Ideally, the fourth candle should have higher volume compared to the previous
three candles to reinforce the strength of the reversal.
Strike
Candle
1
2
3

79 | P a g e
 Complexity: Complex
Direction: Bearish
Type: Reversal
Success Rate: 55-65%
Higher Volume: 65-75%

Key Features:
 The first three bearish candles reflect steady selling pressure and dominance
of bears.
 The fourth bullish candle suggests a temporary shift in sentiment, as buyers
attempt to regain control.
 If the price continues to fall after the pattern, it confirms the temporary nature of
the bullish move and the continuation of the downtrend.

Explanation:

 Temporary Rebound:
The strong fourth bullish candle may appear to suggest a reversal, but it’s
generally viewed as a temporary upward correction or short-covering rather
than a change in trend direction.
 Continuation Signal:
The pattern signals that the bears remain in control, and the upward move is
likely to be exhausted quickly, resulting in a continuation of the downtrend.
 Bearish Momentum:
The forceful downward movement of the first three candles shows sustained
bearish momentum. The large fourth bullish candle may lure in buyers, but bears
are expected to reassert control once this correction fades.

Stop Loss

Entry Level

Bearish Three Line Strike Chart Pattern

Trading Strategy:
01. Trend Context:
 The Bearish Three Line Strike pattern is most reliable when it forms after a strong
uptrend or near a significant resistance level.
02. Entry Point:

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 Enter a short position after the fourth bearish candle closes, or when the price
breaks below the low of the fourth candle (after confirmation).
 A conservative entry would be when the price breaks below the low of the third
bullish candle.

03. Stop Loss:

 A stop loss can be placed above the high of the third bullish candle to manage
risk.

04. Volume Confirmation:

 Ensure that the fourth bearish candle has high volume, as this confirms the
strength of the reversal signal.

Crystal Insurance formed Bearish Three Line Strike; Dated: 24th Nov., 2024

Strength of the Pattern:

The Bearish Three Line Strike is considered a reliable and powerful reversal
pattern. It signals that the buyers' strength is fading and sellers are gaining control.
When confirmed with volume and other technical indicators, it provides a high-
probability trading opportunity.

This pattern is often used in conjunction with other tools such as resistance levels,
Fibonacci retracements, or RSI (Relative Strength Index) to confirm the bearish
reversal.

Rising Three Methods

Rising Three Methods Candlestick Pattern

It is a five-candle bullish continuation pattern:

1. A strong bullish candle establishes control.

2. Three small candles move downward or sideways but remain mostly inside the
first candle’s range.
3. A final strong bullish candle closes above the first candle’s high.

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Interpretation: buyers pause while limited profit-taking occurs, then regain control. It
is strongest in an established uptrend, near structural support, with expanding
volume on the confirmation candle.

Three rising method

Three small
red candles
Big
green
candle
Big
green
candle

Rising Three Methods

Falling Three Methods

Falling Three Methods Candlestick Pattern

It is a five-candle bearish continuation pattern:

1. A strong bearish candle establishes seller control.

2. Three small candles rise or move sideways but remain mostly within the first
candle’s range.
3. A final strong bearish candle closes below the first candle’s low.

Interpretation: sellers pause while a weak countertrend rally occurs, then regain
control. The pattern is more meaningful within an established downtrend, near
resistance, with increased volume and bearish follow-through on the final candle.
Falling
Three Methods

Big
red Big
candle red
candle

Three small
green candles
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 Impulse vs Exhaustion Candlesticks.

These are behavioural candle classifications, not fixed named patterns.

Impulse Candlestick

An impulse candle indicates strong directional participation:

 Large real body relative to its range

 Small opposing wick
 Close near the candle’s extreme
 Often breaks or expands market structure
 Stronger when supported by increasing volume and follow-through

It suggests buyers or sellers controlled most of the completed period.

Exhaustion Candlestick

An exhaustion candle may indicate that an extended movement is losing strength:

 Appears after a prolonged directional move

 Unusually wide range or volume spike
 Long rejection wick or weak close
 Limited progress despite substantial volume
 Subsequent candle fails to continue the movement

SELL

BUY

Bullish Bearish
Exhaustion and Impulsion Exhaustion and Impulsion
Exhaustion does not automatically mean reversal. It requires meaningful location,
structural failure and confirmation.

Bullish Fakeout Pattern

Bullish Fakeout Pattern, also called a False Breakdown, Bear Trap, or Bullish
Liquidity Sweep.

It develops when:

1. Price approaches a predefined support zone.

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2. A candle temporarily trades below support.
3. Sellers fail to maintain acceptance below the zone.
4. The candle closes back above support or inside the prior range.
5. Subsequent candles provide bullish confirmation and follow-through.

Common characteristics:

 Long lower rejection wick

 Close near the candle’s upper range
 Volume expansion during the false breakdown
 Reclaim of support or prior structure
 Failure of sellers to create a lower close

BUY

Bullish Fakeout

Market psychology: The downside breakout attracts sellers, but price quickly
reclaims support. Their exits may contribute to the bullish response.

A wick alone is insufficient. Confirm the location, reclaim, volume, structural

response and follow-through using historical charts or paper practice.

Professional reading rule:

Impulse = strong effort with strong progress.
Exhaustion = significant effort with limited or rejected progress.

Bearish Fakeout Pattern

Bearish Fakeout Pattern, also called a False Breakout, Bull Trap, or Bearish Liquidity
Sweep.

It develops when:

1. Price approaches a predefined resistance zone.

2. A candle temporarily trades above resistance.
3. Buyers fail to maintain acceptance above the zone.

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 4. The candle closes below resistance or back inside the prior range.
5. Subsequent candles provide bearish confirmation and follow-through.

Common characteristics:

 Long upper rejection wick

 Close near the candle’s lower range
 Possible volume expansion during the false breakout
 Rejection or reclaim of the resistance zone
 Failure to establish a higher close

SELL

Bearish Fakeout
Market psychology: The apparent breakout attracts buyers, but price quickly falls
back below resistance. This demonstrates failed upward acceptance—not a
guaranteed reversal.

Confirm the location, closing position, volume, structural response and follow-
through using historical charts or paper practice.

How to Use Candlestick Patterns in Trading

Confirmation: Candlestick patterns should be confirmed by other technical

indicators or chart patterns.
For example, a bullish engulfing pattern may be more reliable if it coincides with a
support level or a positive MACD crossover.

Context Matters: The significance of a candlestick pattern depends on where it

occurs.
For example, a hammer at the bottom of a downtrend is a strong reversal signal, but
the same hammer in the middle of a range-bound market may not be as reliable.
Volume: Patterns accompanied by high volume are generally more reliable.
For example, a strong bullish engulfing pattern with high volume suggests stronger
buying interest.
Risk Management: Always use proper risk management, like placing stop-loss
orders, as candlestick patterns, though helpful, do not guarantee market movements.

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 Conclusion
Candlestick patterns are a key tool in technical analysis that helps traders
understand market sentiment, identify potential trend reversals, and make informed
decisions. By recognizing these patterns and understanding the context in which
they occur, traders can gain insights into market psychology and anticipate future
price movements. However, candlestick patterns should not be used in isolation—it's
important to combine them with other technical indicators for better decision-making.

Thank You

©Md. Aminul Islam

islam.aminul63@[Link]
+8801733608060

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