CANDLESTICK CHART BASICS

Bullish and Bearish Candlesticks

When the closing price of the candlestick is greater than the opening price, then the candle is a bullish
candlestick and is represented by a white or green candlestick real body. Conversely, if the closing
price is less than the opening price, then the candlestick is a bearish candlestick and is represented by
a black or red candlestick real body. Throughout the [Link] site, the words bull or bullish candlestick
(shown by a green candlestick) and bear or bearish candlestick (shown by a red candlestick) will be
used.

Real Body and Upper and Lower Shadows

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The rectangular area between the opening and the close of a session of trading is called the real body.
The thin lines that look like candle wicks above and below the real body are called shadows. The
shadow above the real body is called the upper shadow, the top end of the upper shadow
corresponding to the high of the session of trading, and the shadow below the real body is called the
lower shadow, where the bottom end of the lower shadow corresponds to the low of the session of
trading.

Bullish Candlestick

When discussing trading sessions based on a trading day (morning to afternoon), generally speaking the
two most significant times of the trading day are the opening and the close. The opening and the close
create the real body of the candlestick; hence, the most important part of a candlestick is the real body.
By looking at a candlestick, a person can quickly tell whether traders were eagerly buying throughout the
day (bulls were in charge for the trading day) - the candlestick is green, or whether traders were eagerly
selling throughout the day (bears dominated the trading day) - the candlestick is red. By looking at the
size of the real body of the candlestick, a trader can tell if the bulls were significantly in charge of the
trading day (a tall green candlestick) or only moderately in charge of the trading day (a small green
candlestick). Similarly, if a trader sees a large red candle, he or she can assume that the selling pressure
of the bears overpowered the bulls for the day; however, if the candlestick is very small and red, then the
trader can see that the bears were only slightly more powerful that day than the bulls. In summary, the
real body of a candlestick can summarize the outcome of a period of trading in an easy to see way –
green = bulls win the trading session, red = bears win the trading session; and the height of the candle

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equals the margin of victory for the bulls or the bears.

Steve Nison (1994) states that “for a [bullish] candle to have meaning, some Japanese candlestick
traders believe that the real body should be at least three times as long as the previous day’s real body.”
(p. 20). Roads (2008) suggests the following: “determine the area covered by the difference between the
close and the open. If it’s at least 90 percent of the area covered by the difference between the high and
low, you have a long white candle” (p. 76). An example of a computer charting package’s definition is: “Its
Close price is higher than the Open price; Its body is longer than each shadow; Its body is longer than
the average body size calculated for the specified number of preceding candles” (ThinkorSwim, 2011).

Bullish Marubozu

There are specific versions of the bullish candle. The first is a very bullish candlestick called the bullish
marubozu. The rough translation of marubozu is “bald or little hair” (Rhoads, 2008, p. 74). A marubozu
is bald or has little hair because a marubozu has no upper or lower shadow, or at least a very small
upper and/or lower shadow. This is the most extreme form of the bullish candlestick because bulls were
in charge from the opening to the close; bears were unable to push prices below the opening price and
the trading session ended with bulls still buying pushing prices upward until the close.

Closing Bullish Marubozu

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A less bullish version, but nevertheless still bullish, is the closing bullish marubozu. With the closing
marubozu, prices opened, but during the trading session, bears were able to push prices low enough to
make a new low; however, bulls returned and kept buying and rising prices until the close of the day. The
closing marubozu has no upper shadow because the close of the trading session is also the high of the
trading session.

Opening Bullish Marubozu

The final version of the bullish marubozu is the opening bullish marubozu. The opening marubozu
opens and continues higher throughout the day, never going below the opening price. Unfortunately for
bulls, prices rise to a point where bears come in and are strong enough to push prices lower to the close.
The fact that bears were able to possess enough power to push prices lower makes this candlestick
pattern less bullish than the regular marubozu where bulls started the day in control and ended the day in
control.

Bearish Marubozu

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In contrast, the bearish marubozu occurs when prices open and immediately there is selling, this selloff
continues until the close when selling pressure from the bears makes the close the low of the trading
session. The bearish marubozu should have no upper or lower shadow.

Closing Bearish Marubozu

The closing bearish marubozu opens, but during the trading session bulls are able to move higher past
the opening price and make an upper shadow; however, bears take over and for the rest of the trading
session, bears push prices downwards making the closing price the low of the trading session as well.

Opening Bearish Marubozu

Though still very bearish, the opening bearish marubozu is less bearish than the previous two
marubozu’s because during the trading session, bulls are able to repel the bears, thus pushing the
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closing price higher than the low reached during the session.

Normally, one single candlestick is not enough justification to make a trade. However, there are
instances when a single candlestick can provide confirmation of a support or resistance line, a trendline,
a moving average, or a breakout.

Normally, one single candlestick is not enough justification to make a trade. However, there are
instances when a single candlestick can provide confirmation of a support or resistance line, a trendline,
a moving average, or a breakout.

Bullish Candlestick Confirming Support

In the chart above of the S&P 500 Exchange Traded Fund (ETF) the blue support line is confirmed with
large bullish candlesticks. It can be inferred from these large bullish candlesticks that bulls are entirely in
charge of the market at the price around the support area. An informed trader would also notice that
these two strong bullish candlesticks have created a double bottom chart pattern.

Bearish Candlestick Confirming Resistance

The chart above of the Energy SPDR ETF (XLE) shows that whenever prices reached the area of
resistance, shown with the blue line above, bears came in to sell and were able to create long bearish
candles downward off of the resistance line. It can be inferred from the chart that either bulls were unable

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or unwilling to try to push prices higher past the resistance area or the bulls were overwhelmed by the
selling pressure of the bears. Either way, the resistance line was defended and kept intact.

Bullish Candlestick Confirming Uptrend

The chart above of the Dow Jones Industrial Index ETF (DIA) shows that each time the prices reached
the upward sloping trend line a large bullish candlestick was formed. Bulls were very willing to buy the
Dow Jones Industrial index at this trend line and were able to keep the upward trend intact. Similarly,
bears were unwilling or unable to sell into the area of the upward sloping trend line, thus keeping the
upward trend unbroken.

Bearish Candlestick Confirming Downtrend

Notice in the chart above of the Silver ETF (SLV) that price movement up into the downward trend line
was met by large bearish candlesticks. In fact, every large bearish candlestick off of the downward trend
line set the stage for at least a week of subsequent lower prices.

Bullish Candlestick Confirming Moving Average

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Bullish candlesticks can be used to confirm the validity of common moving average support lines. In the
chart above of the Energy SPDR Index ETF (XLE), the commonly used 50-day simple moving average
was confirmed multiple times by large bullish candlesticks. Every time the prices moved into the area of
the upward sloping 50-day moving average, the bulls appeared pushing prices higher and initiating multi-
week uptrends before returning back to the moving average to once again be defended by yet another
bullish candlestick.

Bullish Candlestick Breaks Overhead Resistance

A large bullish candlestick rising through overhead resistance can signal resistance has finally been
broken. Especially when combined with large volume, a large bullish candlestick piercing through
overhead resistance can signify that a new trend upward is about to begin. A 7-month consolidation in
the Gold ETF (GLD) was broken with a large bullish candlestick. Bears were unable to repel this strong
showing of the bulls, and for the next few months the trend was almost completely up.

Bearish Candlestick Breaks Below Support

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The chart above of the S&P 500 ETF (SPY) shows a large bearish candlestick penetrating through the
support line and closing below the support line. In fact the candlestick that broke through the support
area was a closing bearish marubozu, meaning that bears pushed prices down to the very end of trading,
bull were unable or unwilling to step in to buy at the support area like they did previously. This is a sign
that the status quo is about to change, which was confirmed by a steep drop the next few trading days.
Also notice the bull candle the following day – the bullish candlestick was unable to go above the
recently broken support line. In fact, bears were now willing to sell or short to defend this historical
support line which now becomes the overhead resistance line.

Bullish Candlestick Acting As New Support

Sometimes a strong bullish move upward resulting in a large bullish candlestick can be overdone, having
moved too far too fast and becoming overbought. However, there are times when this large bullish
candlestick can act as support for these retreating prices. The chart above of the Gold ETF (GLD) shows
two instances of the opening of the large bullish candlestick acting as price support over time. As was
taught previously, a large bullish candlestick is created when prices reach a level where bulls feel
confident buying and bears are either not willing or are incapable of pushing prices lower. When prices
later reach that same price level, bulls feel confident once again to buy; therefore, confirming an area of
support.

Bearish Candlestick Acting As New Resistance

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Long bearish candlesticks are typically oversold and consequently are subject to bullish reversals.
However, the opening of the large bearish candlestick can sometimes be used as a new resistance level.
As can be inferred from a large bearish candlestick, the bears were confident in selling at the area of the
open of the large bearish candlestick; in addition, the bulls were unable or unwilling to buy and thus the
bears were able to sell without much opposition throughout the entire trading day. When prices begin to
move upward over time entering into the price levels where the long bearish candlestick was formed, the
same price level is finally reached where previously the bears were able to strongly sell and the bulls
were unable to push prices higher. Thus, an overhead resistance is created. The chart above of the
Utility SPDR (XLU) illustrates how the opening of the long bearish candlestick acted as resistance for
future prices.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

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 Advance Block Candlestick Chart Pattern and Stalled Pattern

The Advance Block and Stalled Pattern (also known as the Deliberation Pattern) are candlestick patterns
made of three bullish candlesticks that often occur during an uptrend and warn of a slowing uptrend, but
not necessarily a trend reversal.

Advance Block Candlestick Pattern

The advance block pattern occurs when on the first day a long bullish candlestick appears followed by
another long bullish candlestick that opens within the real body of the first day’s real body and closes
above the first day’s close and high. Also, a long upper shadow should appear on this second day. The
third day is a small bullish candlestick that usually opens within the second day’s real body and closes
above the second day’s close; it should have a upper shadow as well. The focus of this pattern is that
the market is making new highs, but the bullish candlesticks’ real bodies are getting progressively smaller
as prices make these new highs. The upper shadows are showing that bulls wish to push prices higher,
but during the day the bears are able to successfully push prices down off of the highs and the bulls
have to settle for gradually smaller gains.

For a definitive definition, ThinkorSwim (2011) charting package defines the advance block as:
11/18/2014 Video of Advance Block Candlestick Chart Pattern and Stalled Pattern

Each candle is bullish

Each candle opens within the real body of the previous candlestick
The second day’s candlestick real body must be 70% or less of the first day’s real body and the
third day’s real body must be 70% or less of the second day’s real body.
The second and third day have a long upper shadow that is at least 75% of the height of the
prior 20 day average of candlesticks’ real bodies.

Stalled Candlestick Pattern or Deliberation Candlestick Pattern

The stalled pattern or deliberation pattern is like the advance block in that it occurs during an uptrend
and warns of a slowing uptrend and is made up of three bullish candlesticks. The defining characteristic
is the third day is a small candlestick that gaps up like a star or is located at the upper end of the second
day’s bullish candlestick real body much like a harami pattern.

Advance Block and Stalled Candlestick Pattern Suggest Selling of Longs

Nison (1991, p. 144) suggests that the advance block and stalled pattern be used to sell out existing
longs, but does not suggest going short. The advance block and stalled pattern should not be
considered as reversal patterns. Often the advance block and stalled pattern lead into a period of
consolidation, though at times they can lead to a reversal of trend to the downside.

Advance Block Candlestick Chart Example

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The chart above of the Nasdaq 100 ETF (QQQ) shows an advance block candlestick pattern. The first
candlestick of the pattern was a long bullish candlestick that closed near the high of the day. The second
day’s candlestick closed above the high of the previous day but was a smaller candlestick than the first
day’s real body. Also, the second day had a large upper shadow, showing that the bears “blocked the
advance” of the bulls to close at the high of the day. The third day was a small candlestick that was
almost a doji, emphasizing that the bulls had run out of power. The third day also had an upper shadow
that was unable to go passed the second day’s high price. From there, the market fluctuated at these
high prices for four days and then began moving downward.

Stalled Pattern or Deliberation Pattern Candlestick Chart Example

A stalled candlestick pattern is illustrated on the chart above of the Nasdaq 100 ETF (QQQ). The first
and second days are both bullish candlesticks. The third day is a small candlestick that barely closes
higher than the second day’s closing price. This inability of the bulls to push prices higher shows that
they are weakening and either a consolidation period will emerge, or like in the chart above, the bears
take over and a downtrend emerges.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.

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Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.

ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

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 Bullish Engulfing Pattern

Bullish Engulfing Pattern

The bullish engulfing pattern is a two candlestick reversal pattern that occurs during a downtrend. The
definition of a bullish engulfing pattern is as follows:

The first day is a bearish candlestick, but can be a doji as well.

The second day is a bullish candlestick that is larger in height than the first day’s candlestick.
Lastly, the open and low of the second day should be lower in price than the first day’s close and
the second day’s close and high should be higher in price than the first day’s open.
The strictest description of a bullish engulfing candlestick pattern requires that the real body of
the second day be larger than the first day’s candlestick which would include its upper and lower
shadow.
Sometimes the bullish engulfing pattern is referred to as a three outside up pattern. The difference being
the addition of a bullish candlestick on the third day that closes above the high of the second day’s
bullish candlestick.

Traits That Improve the Bullish Engulfing Pattern's Effectiveness

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According to Nison (1991, p. 39) the following traits increase the odds that a bullish engulfing pattern is
an important reversal indicator:

The first day has a very small real body and the second day has a very long real body.
Reasoning: A small bearish candlestick after a downtrend shows the bears are unable to push
prices as low as they have during the prior trend. A small bearish candlestick shows the bears
have less power; whereas, a large bearish candlestick shows the bears having more power.
Likewise, a large bullish candlestick that defies the previous downtrend shows that bulls came
back into the market and the bears were unable to stop them. The longer the bullish candlestick
the greater the show of force by the bulls.
The bullish engulfing pattern occurs after a long downtrend or a very quick move lower.
Reasoning: Sellers or traders who are shorting have probably already done so after an extended
move downward and therefore there are fewer potential sellers or shorters. In the case of a
sudden move downward, often these quick moves are overdone and are susceptible to
reversals.
Volume on the second day candlestick is very large.
Reasoning: The fact that unusually high amounts of volume were transacted on a large bullish
candlestick means that there was a large turnover of shares throughout the day and that traders
had to bid up prices in order to buy shares, which is very bullish. Explaining this using supply and
demand basics, if there are less traders willing to sell their shares (ie less supply) and there are
more traders willing to buy shares (ie more demand), then prices should rise, hence creating a
bullish candlestick where prices opened and climbed throughout the trading day to close higher.
The second day’s real body is larger than several previous days’ candlestick heights.
Reasoning: Many small candlesticks show indecision. A large bullish candlestick that is larger
than the previous indecisive candlesticks shows that the market has finally made a decision and
the decision is to move upward.
The bullish engulfing pattern occurs in an area of support.
Reasoning: Support is an area where historically bulls have come into a market to buy at a
certain price level. If the bullish engulfing pattern occurs at this support price level, then a trader
might feel more confident buying because the support acts as another bullish confirmation.

Trading Suggestions for the Bullish Engulfing Candlestick Pattern

For those traders that go long based on the bullish engulfing pattern, Nison (2003, p. 66) suggests
placing a stop loss order under the lows of the bullish engulfing pattern, since the bullish engulfing
pattern should act as an area of support.

Bullish Engulfing Pattern Blended Candle = Hammer

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When the first day and the second day of the bullish engulfing pattern are combined, it often looks like a
hammer candlestick, which is also a bullish candlestick pattern.

Bullish Engulfing Pattern Confirmation of Support

The chart above of the Nasdaq 100 ETF (QQQ) shows a blue support line and the low of the second day
of the bullish engulfing pattern bouncing off of that support. From the first day’s bearish candlestick
closing price, it can be inferred that the next day prices gapped down to the open of the second day’s
candlestick. After the bears tested support, the bulls were able to push prices to close above the first
day’s opening price. Therefore the second day’s bullish candlestick engulfed the real body of the first
day.

Bullish Engulfing Pattern Creating New Support

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Nison (1994, p. 78) suggests that bullish engulfing patterns can become an area of support. The chart
above of Exxon Mobil illustrates this concept well. After a long downtrend a bullish engulfing pattern
emerges with many solid traits: the first day candle is small; the second day candle is very large
engulfing two candlesticks prior to it; and it occurs after a long, continual downtrend. After the bullish
engulfing pattern prices rally upward; however prices begin to trend back down until they reach a low
equal to the low of the bullish engulfing pattern’s second day candle low. An aggressive trader could
attempt to buy at the price level established by the bullish engulfing pattern over 30 trading days prior. In
this specific instance, the trader would have been rewarded favorably.

Bullish Engulfing Pattern 2nd Day High Volume Confirmation

Notice on the chart above of the Energy SPDR ETF (XLE) how the second candle of the bullish
engulfing pattern had the highest volume of any of the day’s shown in the chart. It is important
confirmation to see high volumes accompany large bullish candlesticks. This shows that bulls are serious
about buying that day.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 4/4
 Bearish Engulfing Candlestick Pattern

Bearish Engulfing Pattern

A bearish engulfing pattern is a two candlestick trend reversal pattern that follows an uptrend. The
bearish engulfing pattern criteria are:

The first day should be a bullish candlestick, but can be a doji.

The second day candle is bearish and is taller than the first day’s candle.
The open and high of the second day should be greater in price than the first day’s close and the
second day’s close and low should be less than the first day’s opening price.
The strictest definition of a bearish engulfing candlestick pattern necessitates that the real body
of the second day be larger than the first day’s candlestick (including the upper and lower
shadow).
Occasionally the bearish engulfing pattern is referred to as the three outside down pattern. The
difference is the addition of a third bearish candlestick that closes below the low of the second day’s
bearish candlestick.

Traits That Improve the Bearish Engulfing Pattern's Effectiveness

11/18/2014 Video: Bearish Engulfing Candlestick Pattern

Nison, in his book Japanese Candlestick Charting Techniques (1991, p. 39) states that the following
factors increase the likelihood that the bearish engulfing pattern is an important trend reversal indicator:

The first day candlestick has a very small real body and the second day candlestick has a very
long real body.
Reasoning: After an uptrend, a small bullish candle appears showing that bulls are unable to
push prices very much higher as they have been able to do previously. As a reminder, a small
bullish candlestick shows bulls having less power compared to large bullish candlestick which
shows bears having more power. Similarly, a large bearish candlestick that appears after an
uptrend shows that bears are able to come back into the market and the bulls were unable or
unwilling to stop this bearish assault. The longer the bearish candlestick is, the more powerful
the bears were.
The bearish engulfing pattern takes place following a long uptrend or a rapid move higher.
Reasoning: It can be reasoned that after a long upward move, that most traders who are going to
buy have already done so, this leaves fewer traders to buy and push the price higher. This is
why a small bullish candlestick or doji is important as the first day in the pattern; it shows that
bulls are getting tired. In contrast, explosive moves higher are often overbought and are
vulnerable to reversals downward. The bearish engulfing pattern can signal that the move was
too fast and too much and the trend is about to change.
Volume on the second day candlestick is very large.
Reasoning: Generally, high amounts of volume transacted on a large bearish candlestick
indicates that there was a large turnover of shares throughout the day and that traders had to
sell at the asking price of buyers, therefore decreasing prices were required in order to complete
a transaction, this is very bearish. Clarifying this using the concepts of supply and demand, if
there are more traders willing to sell their shares (ie more supply) and there are less traders
willing to buy shares (ie less demand), then prices should fall, consequently creating a bearish
candlestick where prices opened and fell during the trading day to close lower.
The real body of the second day is larger than candlestick height (including shadows/wicks).
Reasoning: Multiple small candlesticks show uncertainty. The appearance of a large bearish
candlestick that is larger than the previous short candlesticks shows that the market has finally
decided to move downward.
The bearish engulfing pattern occurs in an area of resistance.
Reasoning: Resistance is a historical area in which bears previously have come into a market to
sell at a certain price level. If the bearish engulfing pattern occurs at this resistance price level,
then a trader might feel more confident selling short because the resistance acts as yet another
bearish confirmation that the trend could be changing.

Invalidated Bearish Engulfing Pattern

Nison (1994) states that the bearish engulfing pattern is no longer valid when prices close above the top
of the bearish engulfing pattern which includes the upper shadows; in fact he states that the outlook

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turns from bearish to bullish (p. 78).

Bearish Engulfing Blended Candle = Shooting Star

When combined into one candlestick, the first and second day of the bearish engulfing pattern look like a
shooting star candlestick which is a bearish reversal candlestick.

Bearish Engulfing Pattern Confirmation of Resistance

The chart above of the Energy SPDR ETF (XLE) demonstrates how the blue resistance line acted as
resistance for the high of the second day of the bearish engulfing pattern. Once the upper shadow of the
bearish candle reached the resistance area, the bears took charge for the rest of the day. Confirmation
of resistance plus the bearish engulfing pattern were a potent combination for the bears who took the
ETF downwards for the next few months. The bearish engulfing pattern in this chart was a good example
of the second day candle’s real body being larger than the entire first day candle. It was also good that
the bearish candlestick on the second day was so large, showing much force behind the bearish move
downward.

Bearish Engulfing Pattern Creating New Resistance

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Nison (1994, p. 78) suggests that bearish engulfing patterns can become an area of resistance for future
prices. The chart above of the Energy SPDR ETF (XLE) illustrates a bearish engulfing pattern with many
solid traits: the first day candle is small; the second day candle is very large engulfing five candlesticks
prior to it; and it occurs after a long, continual uptrend. After the bearish engulfing pattern, prices fall but
after a week prices begin to trend back up until they reach a high equal to the high of the bullish
engulfing pattern’s second day candle close. An aggressive trader could attempt to sell short at the price
level established by the bearish engulfing pattern over 17 trading days prior. In the example above, the
trader would have been rewarded with a profitable trade. It is noteworthy that the candlestick that
approached the resistance was almost a bearish engulfing pattern in and of itself. The precise
candlestick definition for that two candlestick pattern is the Dark Cloud Cover.

Bearish Engulfing Pattern 2nd Day High Volume Confirmation

Notice on the chart above of the Dow Jones Industrial Average ETF (DIA) how the second candle of the
bearish engulfing pattern had the second highest volume of any of the day’s shown in the chart. It is
important confirmation to see high volumes accompany the second day large bearish candlestick in the
bearish engulfing pattern. This shows that bears were serious about selling that day. Also note that the
two days prior to the pattern were very low volume and were very small candles. It can be inferred that
bulls were running out of energy (small candlesticks) and weren’t interested at buying at these higher
prices (low volume). The large bearish candlestick with high volume proved that the bulls had no energy
left and prices subsequently wandered downward for weeks thereafter.

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Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 5/5
 Bullish Harami Candlestick Pattern

Bullish Harami Candlestick Pattern

The bullish harami is a two candlestick trend change signal that is potentially bullish if it occurs after a
downtrend. According to Nison (1991, p. 80), the harami pattern is not as significant a reversal pattern as
an engulfing pattern or hammer. A harami pattern is made up of a large candlestick followed by a small
candlestick whose real body is between the real body of the first day’s large candlestick real body.
During a downtrend, the real body of the first day is bearish and the small real body of the second day is
bullish, but can be bearish as well. Nison (1994, p. 88) explains that after a downtrend, when the second
day’s small real body candlestick is toward the bottom of the first day’s real body, it is called a low-price
harami.

A related pattern is the three inside up pattern that is found at bottoms. The three inside up pattern is a
confirmed bullish harami pattern where the first day is a bearish candlestick followed by a small body
bullish candlestick where its price range is within the first day’s real body. The third candlestick is a
bullish candle that opens within or above the real body of the second day and then closes above the high
of the first day’s bearish candlestick. A less demanding form of the pattern requires that the third day
close above the close of the second day’s candlestick.
11/18/2014 Bullish Harami Candlestick Pattern Video

Bullish Harami Cross Candlestick Pattern

A harami cross occurs when the second day is a doji rather than a small bullish or bearish real body.
Nison (1991, p. 80) states that the harami cross should be viewed as a major reversal signal. Though the
harami cross can occur after a downtrend, Nison suggests that the harami cross is more effective at tops
(1991, p. 86).

Psychology of Bullish Harami

The significance of a harami pattern is illustrated next. During a downtrend a long bearish candlestick
emerges, which reinforces that the bears are still in charge. Nevertheless, on the second day, rather than
heading lower, which a trader would expect if the bears were still in charge, the price gaps higher. During
the second day, the price moves slightly up and down, suggesting that neither the bears nor bulls are in
charge. This indecision of the harami pattern suggests that prices could move sideways or could reverse
upward because the bears’ downward move has been exhausted.

Traits that Increase a Bullish Harami's Effectiveness

Nison (1994, p. 87) gives important traits that increase a bullish harami’s importance:

The more the real body of the second day is at the midpoint of the first day’s real body, the better
the reversal of the trend. However, following a downtrend when the second day’s small real body
candlestick is toward the bottom area of the first day’s candlestick real body, the greater the

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11/18/2014 Bullish Harami Candlestick Pattern Video

chance of consolidation rather than a reversal upward.

The more the open, high, low, and close are within the prior day’s real body, the greater the
chance of reversal.
The smaller the shadows and real body of the second day and thus the more like a doji the
second day is, the higher the probability of a full reversal.

Blended Candle Analysis of Bullish Harami = Hammer

Using blended candle analysis where the two days of the bullish harami pattern are combined into one
day (open of day 1 candle to close of day 2 candle) is equivelent to a one candle hammer candlestick.
The hammer is a bottom reversal candlestick pattern.

Harami Pattern Downtrend Consolidation and Support Example

After a multi-week rolling downward trend on the chart above of Intel Corporation (INTC), two large
bearish candlesticks appeared pushing prices to a new low for the trend. However, the bears pushed too
hard and the following day, the second day of the harami, gapped up. This small bullish candlestick of
the second day of the harami pattern told traders that a change in trend could be happening. The day
after the harami pattern, another bullish candlestick appeared and gave greater evidence that either
prices would be consolidating or moving higher. On the seventh and ninth day after the harami pattern,
the candlesticks tested and confirmed the support line established by the close of the bearish candlestick
of the first day of the harami pattern.

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11/18/2014 Bullish Harami Candlestick Pattern Video

Harami Cross Bottom Example

The chart above of the Gold ETF (GLD) shows an excellent example of the harami cross at a bottom.
The chart illustrates a four day dramatic move downward, with a very large bearish candlestick on the
fourth day. The following day’s doji that gapped higher to the midpoint of the large bearish candlestick
suggests that the bears overshot themselves downward and that sentiment had radically changed the
next day (the day the doji occurred). The large bearish candlestick established an area of support at its
closing price that was confirmed weeks and months later.

Works Referenced

Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 4/4
 Bearish Harami and Harami Cross Candlestick Chart Pattern

The bearish harami is a two candlestick trend change signal that is potentially bearish if it occurs after
an uptrend. According to Nison (1991, p. 80), the harami pattern is not as significant a reversal pattern as
an engulfing pattern or hammer. A harami pattern is made up of a large candlestick followed by a small
candlestick whose real body is between the real body of the first day’s large candlestick real body.
During an uptrend, the real body of the first day is bullish and the second day’s small real body is
bearish; however, the second day’s real body can be bullish as well. Nison (1994, p. 88) explains that
after an uptrend when the second day’s small real body candlestick is toward the upper part of the first
day’s real body, it is referred to as a high-price harami.

A related pattern is the three inside down pattern that is found at tops. The three inside down is a
confirmed bearish harami pattern where the first day is a bullish candlestick followed by a small bearish
candlestick with its price range within the real body of the first day. The additional day, the third day is a
bearish candlestick that opens within or below the real body of the second day and then closes below
the low of the first day’s bullish candlestick. Some traders only require that the third day close below the
close of the second day.
11/18/2014 Bearish Harami and Harami Cross Candlestick Chart Pattern Video

Bearish Harami Cross Candlestick Pattern

A harami cross occurs when the second day is a doji rather than a small bullish or bearish real body.
Nison (1991, p. 80) states that the harami cross should be viewed as a major reversal signal. Though the
harami cross can occur after a downtrend, Nison suggests that the harami cross is more effective at tops
(1991, p. 86).

Psychology of Bearish Harami

The significance of a harami pattern is illustrated next. During an uptrend, a long bullish candlestick
appears, that likely makes a new high. It is clear that the bulls are in charge. However, the second day
gaps down and moves slightly up and down throughout the day, but the candlestick ends up closing
where the day opened. If the bulls were still in charge, the next day might have gapped up higher and
made another new high for the uptrend, but it didn’t, the prices gapped lower and closed lower than the
previous day. Therefore, the harami pattern suggests that prices could go downward or sideways in the
short term because the bullish upward pressure has diminished.

Traits that Increase a Bearish Harami's Effectiveness

Nison (1994, p. 87) gives important traits that increase a harami’s importance:

The more the real body of the second day is at the midpoint of the first day’s real body, the better
the reversal of the trend. However, after an uptrend when the harami’s second day real body is

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11/18/2014 Bearish Harami and Harami Cross Candlestick Chart Pattern Video

toward the upper end of the first day’s real body, then the more likely prices will consolidate as
opposed to reverse downward.
The more the open, high, low, and close are within the prior day’s real body, the greater the
chance of reversal.
The smaller the shadows and real body of the second day and thus the more like a doji the
second day is, the higher the probability of a full reversal.

Blended Candle Analysis of Bearish Harami = Shooting Star

Using blended candle analysis where the two days of the bearish harami pattern are combined into one
day (open of day 1 candle to close of day 2 candle) is equivelent to a one candle shooting star
candlestick. The shooting star is considered a bottom reversal candlestick pattern.

Harami Pattern Uptrend Consolidation and Resistance Example

Often a harami appears after a strong upward move when bulls pushed prices up too far and too fast.
The chart above of Intel Corporation (INTC) shows two large gaps upward followed by a large bullish
candlestick. However, the following day gapped lower to begin the day and ended the day even lower.
The small real body of the second day of the harami pattern visually illustrated indecision. If a trader
predicted that prices would consolidate or begin to fall, that trader would have been correct. Prices never
surpassed the close of the first day bullish candlestick of the harami pattern. After the area of resistance
illustrated by the blue line was tested and confirmed, prices began their downward retreat. The harami
pattern above successfully predicted price consolidation and a reversal downward.

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11/18/2014 Bearish Harami and Harami Cross Candlestick Chart Pattern Video

Harami Cross Top Example

A harami cross is shown above on the chart of Exxon Mobil (XOM). After about a 10% move higher and a
large bullish candlestick that made a new high for the uptrend, a doji appears. Since a doji is a perfect
example of indecision and since the open and close of the doji are lower than the close of the previous
day’s bullish candlestick, the bulls should be worried that the trend is about to change, which on the
chart above, shows that it did change to the downside.

Works Referenced

Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 4/4
 Bullish and Bearish Belt Hold Lines Candlestick

Bullish Belt Hold Line Candlestick

A belt hold line is a single candlestick pattern. A bullish belt hold occurs when prices open on the low of
the day and then immediately move higher creating a long bullish candlestick. The bullish belt hold is
also referred to as a white opening shaven bottom.

Bearish Belt Hold Line Candlestick

A bearish belt hold occurs when prices open on the high of the day and then move down for the
11/18/2014 Bullish and Bearish Belt Hold Lines Candlestick Video

remaining period, thus creating a long bearish candlestick. The bearish belt hold is called a black
opening shaven head.

Belt Hold Lines Forecasting Future Uptrends and Downtrends

According to Nison (1991, p. 94), if a bullish belt hold occurs at low prices, it forecasts a rally; likewise, if
a bearish belt hold occurs at areas of high prices, it signals a top reversal; moreover, the longer the
height of the belt hold candlestick, the more important it becomes. It should be noted that if prices fall
below the open/low of the bullish belt hold, then the pattern is void and similarly, if prices rise above the
open/high of the bearish belt hold, then the pattern is void.

Bullish Belt Hold Candlestick Chart Example

The chart above of the Silver ETF (SLV) illustrates a bullish belt hold off of an area of support shown in
the chart above with a blue line. The day of the bullish belt hold opened with a gap down into the area of
resistance. Immediately, bulls jumped into the market and pushed prices higher and created a large
bullish candlestick.

Bearish Belt Hold Candlestick Chart Example

The chart above of the Russell 2000 Index ETF (IWM) is an example of a bearish belt hold and is also a
bearish engulfing pattern. The open of the bearish belt hold candlestick is a gap up from the previous

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day’s close. However, the prices after the open immediately fall downward and close creating a large
bearish candlestick that eliminates the past two days’ gains and begins a downward trend.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 3/3
 Bullish Counterattack Line Bearish Counterattack Line

Bullish Counterattack Line Candlestick Pattern

The bullish counterattack line or bullish meeting line is a two candlestick pattern that occurs after a
downtrend and is considered a bottom reversal signal. The bullish counterattack line is a less significant
bottom reversal signal than the quite similar piercing pattern. The first candlestick is a bearish
candlestick. The second candlestick opens far below the close of the first day’s bearish candlestick but
then rallies back, closing at roughly the same price as the first day’s candlestick closing price. Therefore,
the second day candlestick is a large bullish candlestick. The large gap down on the second day gives
bears confidence that the downward trend will continue; but to the surprise of bears, rather than heading
further down, prices reverse and fill the gap and close at the same price level of the previous day’s close.
The bears gained no ground that day.

Bearish Counterattack Line Candlestick Pattern

11/19/2014 Bullish Counterattack Line Video and Bearish Counterattack Line Video

In contrast, the bearish counterattack line or bearish meeting line is a two candlestick pattern that
occurs after an uptrend and is considered a top reversal signal. The bearish counterattack line is a less
significant top reversal signal than the related dark cloud cover pattern. The first candlestick is a bullish
candlestick. The second candlestick opens far above the close of the first day’s bullish candlestick but
then retreats, closing at roughly the same price as the first day’s candlestick closing price. Thus, the
second day candlestick is a large bearish candlestick. The large gap up on the second day gives bulls
confidence that the upward trend will continue; but to the surprise of bulls, rather than moving ever
higher, prices reverse downward and fill the gap and close at the same price level of the previous day’s
close. The bull gained no ground that day.

Bullish Counterattack Line Candlestick Chart Example

A bullish counterattack line is shown on the chart above of the Financial SPDR ETF (XLF). The first day
of the bullish counterattack line was a long bearish candlestick. The next day, prices gapped down, but
the bulls were able to push prices to the same price level as the close of the bearish candlestick. If a
trader were to combine the candlesticks of the second day of the bullish counterattack line with the
following day candlestick, the combined candlestick would make up the second day of a piercing pattern
that penetrated more than two-thirds of the way into the bearish candlestick on the first day.

Bearish Counterattack Line Candlestick Chart Example

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11/19/2014 Bullish Counterattack Line Video and Bearish Counterattack Line Video

A bearish counterattack line is shown on the chart above of Exxon Mobil (XOM). A multi-week uptrend
precedes the bearish counterattack line pattern. A bullish candlestick is followed by a large gap up;
however, the bulls are unable to maintain prices at or above the opening price and the bears end up
bring prices down to the prior day’s closing price. After the bearish counterattack line, nine bearish
candlesticks followed.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 3/3
 Dark Cloud Cover Candlestick Chart Pattern

Dark Cloud Cover | Bearish Piercing Line

The Dark Cloud Cover or Bearish Piercing Line is a trend reversal pattern that occurs at the top of an
uptrend or congestion band. The candlestick on the first day is a long bullish candlestick and the second
candlestick is long bearish candlestick. The second day candlestick opens above the previous day’s high
and ends up closing within the price range of the previous day’s real body. A less strict definition
suggests that the second day candle can open above the previous day’s close rather than its high.
According to Nison’s (1991, p. 44) research, many technical analysts require the bearish candlestick to
penetrate and close more than 50% into the previous day’s real body. For those familiar with the bearish
engulfing pattern, the bearish piercing line is essentially an incomplete bearish engulfing pattern, since a
bearish engulfing pattern’s second day bearish candlestick penetrates and closes more than 100% past
the real body of the first day’s bullish candlestick.

Psychology of Bearish Piercing Line

11/19/2014 Dark Cloud Cover Candlestick Chart Pattern with Video

The market psychology of the bearish piercing line is explained next. The market is moving upwards
when a large bullish candle appears making a new high. The next day the price gaps upward making yet
another new high, so far the bulls have been completely in charge. However, instead of the price
continuing to go higher, the price begins to sell off and sells off so much that it ends up eliminating over
half of the gains of the bullish candle on the previous day. Essentially the new highs of the past uptrend
have been rejected, the bears have had enough.

Traits Increasing Dark Cloud Cover Candlestick Pattern

Traits that increase a Dark Cloud Cover’s importance is given below (Nison, 1991, p. 44):

The greater the penetration of the second day’s bearish candlestick into the price levels of the
first day’s bullish candlestick, the “greater the chance for a top”.
Reason: By viewing the second day’s bearish candle as a rejection of the first day’s bullish
candle, the more the second day’s bearish candlestick penetrates into the price levels of the first
day’s bullish candlestick the more powerful the bears are showing themselves to be. 50% is a
half rejection of the bulls, 100% is a complete rejection of the bulls, thus the higher the
percentage of penetration the stronger the bears rejection of the current upward trend.
A major resistance area is penetrated when the second day opens above the resistance area
but then prices fall and close below the resistance area.
Reason: A failed breakout above resistance is a sign to the bulls that they have failed and the
confirmation that the resistance is still intact gives confidence to the bears who will now begin
selling.

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11/19/2014 Dark Cloud Cover Candlestick Chart Pattern with Video

High volume accompanies the second day bearish candlestick’s opening.

Reason: If there is large volume on the opening after a gap up from the prior day, there are many
traders who are now long. When the prices start moving downward, the many traders who are
long are now in trouble and might begin to sell.
A dark cloud cover pattern is voided if a future candlestick closes above the high of the dark cloud cover
pattern.

When shorting based on the dark cloud cover, Nison (1994, p. 71) suggests placing a stop loss order at
the highs of the dark cloud cover formation. In contrast, if prices rise above the highs of a dark cloud
cover pattern, he suggests to buy the breakout since the pattern has been voided and the prior uptrend
is now continuing.

Dark Cloud Cover Blended Candle = Shooting Star

When the two candlestick dark cloud cover pattern is combined (open of first day and close of second
day) into a single candlestick it is a shooting star candlestick that is interpreted as bearish.

Dark Cloud Cover Candlestick Chart Example

A very good example of a dark cloud cover pattern is shown above of the Healthcare SPDR ETF (XLV).
Previous to the dark cloud cover, the trend is up for over a month. The first day of the bearish piercing
pattern is a long bullish candlestick that closed creating yet another new high for the uptrend. The next
day, which is the second day of the bearish piercing pattern, opened above the high of the first day. This

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11/19/2014 Dark Cloud Cover Candlestick Chart Pattern with Video

is yet another new high for the uptrend. Nevertheless, after the opening high, the price retreated
throughout the day penetrating about two-thirds of the way down into the first day bullish candle’s prices.
From there, a month long downtrend commenced.

Dark Cloud Cover Confirms Resistance

A few weeks prior to the bearish piercing pattern, the Energy SPDR ETF (XLE) established an area of
resistance, shown on the chart above as a blue line. As is typical for the setup of the dark cloud cover
pattern, an uptrend occurred that contained a bullish candlestick that made a new high for the recent
uptrend; however the bullish candlestick did not exceed the area of resistance. The next day, the second
day of a dark cloud cover pattern, gapped higher and proceeded to attack the overhead resistance. But
the bulls failed to exceed the overhead resistance. Bears were able to eliminate about 85% of the prior
days bullish candlestick real body gains. The day following the bearish piercing pattern confirmed the
bearish sentiment even more by gapping down with three more bearish candles making new lows.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 4/4
 Doji with Candlestick Chart

Doji and Long-Legged Doji

A doji is a single candlestick where the open and close price is equal or very close to the same. The doji
signifies indecision by the market. The doji is considered to be an important reversal signal at market
tops and market bottoms. Nison (1991, p. 151) states from his personal experience that dojis are best at
calling tops, but are not as good at calling bottoms. He suggests that dojis at bottoms need extra
confirmation. A doji often signals a top when during an uptrend a long bullish candlestick appears
followed by a doji candlestick that appears above the close or within the real body of the previous day’s
bullish candlestick. When a doji is seen after an uptrend, Nison (1991, p. 153) suggests selling any longs
traders might have.

The long legged doji is a doji with long upper and lower shadows. When a long legged doji has the open
and close in the middle of the upper and lower shadow, it is referred to as a rickshaw man.

Computer charting packages need very specific definitions of candlesticks to identify them on a chart. A
precise definition given by ThinkorSwim (2011) is that the real body of the doji is less than 5% of the 20
day average of prior real body heights. A long legged doji is defined like the doji, where its real body is
less than 5% of the 20 day average of prior real body heights, but also its shadows are at least 75% of
the 20 day average of previous real body heights.
11/18/2014 Video Explanation of Doji with Candlestick Chart examples

Psychology of Doji Candlestick

Bullish candlesticks show the ability of bulls to push prices higher; bearish candlesticks show the ability
of bears to push prices lower. When a doji emerges, neither the bears nor the bulls have the ability or the
desire to push prices in their desired direction; this indecision or inability to move the markets in one
direction is what make a doji so important as a trend change candlestick pattern. When prices move
upward, it is clear that the bulls have the ability and/or desire to push prices higher. When prices form a
doji after an uptrend, it shows that bulls are unable or unwilling to push prices higher. If prices were
pushed up too far too fast and are overbought, the bears seeing the doji might decide that now is the
time to sell and push prices lower.

Bearish Gapping Doji Candlestick Pattern

Another doji pattern is the bearish gapping doji. During a downtrend prices gap down and then a doji
appears. Bears were able to push prices lower but were unable to push prices even lower by the close of
the day. There is much uncertainty after the close of the doji about where prices will move from here.
Therefore, traders must wait for the next day. If the bulls are able to push prices higher and create a
bullish candlestick then a bullish morning star candlestick pattern has emerged. If a bearish candlestick
forms on the day after the doji, then the doji just acted as a breather for the bears and the downward
trend should continue. This second day bearish candlestick confirms the gapping doji pattern.

Bullish Gapping Doji Candlestick Pattern

In contrast, a bullish gapping doji happens during an uptrend when prices gap up and then a doji
appears. Bulls were able to push prices higher but were unable to push prices even higher by the close
of the day. There is much uncertainty after the close of the doji about where prices will move from there
onward. As a consequence, traders must wait for the next day to confirm. If the bears are able to push
prices lower and create a bearish candlestick then a bearish evening star candlestick pattern has
emerged. If a bullish candlestick forms on the day after the doji, then the doji was essentially a day of rest
for the bulls and therefore, the upward trend should continue. This second day bullish candlestick
confirms the bullish gapping doji pattern.

Doji Top Reversal Candlestick Chart Example

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11/18/2014 Video Explanation of Doji with Candlestick Chart examples

The chart above of the S&P 500 ETF (SPY) shows three different examples of a doji acting as a top
reversal. The first example occurs right after a very large bullish candlestick. The doji opens below the
close of the bullish candlestick and actually creates a bearish harami cross pattern. The doji as a top
reversal was confirmed by the following day’s bearish candlestick. The next example consisted of two
dojis. The first doji followed a large bullish candlestick and established the high price for the top. The
second doji opened a little higher and matched the high price of the previous day’s doji. The top was
confirmed with the next day’s bearish candlestick. The third example starts with another bullish
candlestick. The doji’s high price hits a resistance area established eight days prior and the price is
brought back to the open, thus creating a doji. The next day’s long bearish candlestick confirmed the doji
market top.

Doji Bottom Reversal Candlestick Chart Example

Though, according to Nison, dojis are not as effective at predicting bottoms as they are at predicting
tops, dojis can be seen at bottoms that successfully reverse the trend upward. An example of this is
shown on the chart of Apple (AAPL). After a long downtrend a large doji appears with a long lower
shadow that, like a hammer, tests how far bears are allowed to go down by bulls before bulls begin
buying and pushing prices higher. The indecision of the bears was rejected the following day by a large
gap upward.

Doji at Top and Bottom Example

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11/18/2014 Video Explanation of Doji with Candlestick Chart examples

The example of the S&P 500 ETF (SPY) illustrates a bottom established by a doji and then a top
established by a doji. The bottom is established by a large bearish candlestick that is met the next day by
an indecisive doji. The low of the doji established an area of support that is tested the next day by the
bullish candlestick that confirmed the bottom reversal. An uptrend proceeded until another doji occurred.
This doji established an area of resistance with its high price. The next day’s bearish candlestick
confirmed the pattern; however prices didn’t fall as expected. A few days later another doji appeared.
After the large bearish candlestick tested the high established by the first doji candlestick, the prices
began to fall and confirmed the top reversal.

Bearish Gapping Doji Candlestick Pattern Example

The chart above of the Gold ETF (GLD) shows a bearish gapping doji. After a multi-week downtrend a
gap occurs. An indecisive doji with a very small upper and lower shadow appeared suggesting neither
bulls nor bears were able to push prices in any direction. However the uncertainty of the day’s doji is
cured by the following day’s very large bearish candlestick that confirmed the direction of the gapping
doji was indeed downward.

Bullish Gapping Doji Candlestick Pattern Example

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11/18/2014 Video Explanation of Doji with Candlestick Chart examples

The chart above of the Nasdaq 100 ETF (QQQ) shows two bullish gapping dojis. In each example, a gap
is followed by a doji with small upper and lower shadows. Only after the following day when a bullish
candlestick appears is the indecisiveness of the previous day’s doji solved.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 5/5
 Dragonfly Doji Candlestick Chart Pattern

Dragonfly Doji

A dragonfly doji is a bullish doji candlestick that signals a potential reversal upward after a prior
downtrend. A dragonfly doji is created when the open and close are the same and there is a long lower
shadow and no upper shadow (though a very small upper shadow does not necessarily void the pattern).
With the dragonfly doji, the market opens and bears are able to push prices downward like they have
previously with the prior downtrend; nevertheless, a price level is reached where bulls are willing and
able to push prices back up. When prices are returned to the level that they opened, the dragonfly doji
candlestick is complete. Often a dragonfly doji’s lower shadow acts like an area of support for future
prices because the lower shadow is in an area where bulls are willing to counteract bears and buy to
push prices higher.

The opposite of the dragonfly doji is the gravestone doji.

Dragonfly Doji Candlestick Chart Example

11/18/2014 Dragonfly Doji Candlestick Chart Pattern Video

The chart above of the Silver ETF (SLV) shows a dragonfly doji at the bottom of a downtrend and
subsequent reversal upward. The long lower shadow gives the price levels at which bulls entered the
market and were able to repel the bears and return the price to the opening price for the day. Therefore,
the long lower shadow should stand as an area of support for bulls in the future.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 2/2
 Dumpling Top and Fry Pan Bottom Candlestick Pattern

Dumpling Top Candlestick Chart Pattern

A dumpling top occurs when small real body candlesticks slowly rise and then move in a neutral to
downward direction. The dumpling top pattern is complete when there is a bearish candlestick that gaps
down from the other candlesticks.

Fry Pan Bottom Candlestick Chart Pattern

The opposite of the dumpling top is the fry pan bottom pattern. The fry pan bottom occurs when small
11/18/2014 Dumpling Top and Fry Pan Bottom Candlestick Pattern Video

real body candlesticks slowly move downward and then move in a neutral to upward direction. The fry
pan bottom pattern is complete when a bullish candlestick gaps up from the rest of the candlesticks.

Dumpling Top Chart Example

The chart above of Proctor & Gamble (PG) illustrates a dumpling top. Notice how the top in the chart
above contains many small bodied candlesticks that are mainly neutral. This shows that neither bulls nor
bears are completely in charge of this area of consolidation. Once a strong bearish candlestick gaps
down (illustrated with two blue lines on the chart) away from the area of consolidation, the dumpling top
pattern is confirmed and prices would be expected to go further downward, which in this example of
Proctor & Gamble, the prices do fall downward.

Fry Pan Bottom Chart Example

The chart of Intel (INTC) shows an example of a fry pan bottom. Notice all the small bodied candlesticks
in the area of consolidation after prices fell. A fry pan bottom was confirmed when a large bullish
candlestick gapped up (illustrated using two blue lines on the chart) and away from the area of
consolidation.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.

[Link] 2/3
11/18/2014 Dumpling Top and Fry Pan Bottom Candlestick Pattern Video

Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

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 Evening Star, Evening Doji Star, and Abandoned Baby Top

Evening Star Candlestick Pattern

The Evening Star and Evening Doji Star are top reversal patterns consisting of three candlesticks.
Similar to the evening here on earth predicting that darkness will soon fall down upon the earth, the
evening star candlestick pattern suggests that prices will fall. The first day of the evening star pattern
consists of a long bullish candlestick after a preceding uptrend. Next, the second day candlestick gaps
up, this means that the candlestick opens at a higher price than the first day’s closing price. The second
day candlestick should be a little candlestick and technically, can be either bullish or bearish; but the
main idea is that the real body of the second day is above the real body of the first day.

Lastly, the third day of the evening star pattern is a large bearish candlestick that closes well into the first
day’s bullish candlestick real body. The charting package of ThinkorSwim (2011) requires that the third
day candlestick close below the midpoint of the first day’s candlestick real body. Moreover, it is
preferable if the third day’s candlestick gaps down, but this is not absolutely required for the pattern to be
valid.

Evening Doji Star Candlestick Pattern

11/18/2014 Video of Evening Star, Evening Doji Star, and Abandoned Baby Top

The variation between the evening star and evening doji star consists of the second day candlestick
being a doji for the evening doji star candlestick pattern instead of a small bullish or bearish candlestick
for the evening star pattern. As an informative sidenote, a doji is created when the opening and closing
prices are approximately equal.

Abandoned Baby Top

Occasionally in an evening doji star pattern, a second day’s doji will occur where its low price will be
higher than the first and third day’s high price, when this occurs, then it is a rare form of an evening doji
star called an abandoned baby top.

Traits that Increase Likelihood of Evening Star Trend Reversal

Steve Nison (1991, p. 63) suggests the following attributes of an evening star pattern increase the
likelihood of a trend reversal:

A gap occurs between the first day’s candlestick real body and the second day’s candlestick real
body and a gap between the second day’s candlestick real body and the third day’s candlestick
real body.
The more the penetration of the close of the bearish candlestick on the third day into the price
levels of the first day’s bullish candlestick, the stronger the bearish sentiment.
There is low volume for the first day’s bullish candlestick, but in contrast, there is high volume on
the third day’s bearish candlestick. High volume reinforces that bears are serious about having

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11/18/2014 Video of Evening Star, Evening Doji Star, and Abandoned Baby Top

reversed the previous bullish uptrend.

Psychology of Evening Star Candlestick Reversal Pattern

The market psychology of the evening star candlestick pattern is explained as follows: The first day of
the evening star candlestick is a large bullish candlestick that reinforces the existing uptrend. Next, the
second day candlestick opens higher than the prior day’s close, thus gapping up and proving once again
that the bulls are in control of the current market. Unfortunately for the bulls, prices are not able to be
pushed very much higher. This second day doji or small real body suggests that there is a stalemate
between the bulls and the bears. The stalemate is broken on the third day, when the bulls prove they are
in power by creating a long bullish candlestick.

Evening Star Candlestick Chart Example

The chart above of the Energy SPDR ETF (XLE) is an example of a morning star candlestick pattern.
The previous six days could be characterized as an uptrend, with the first day of the evening star pattern
being a bullish candlestick. The second day gaps up and opens above the closing price of the first day.
So far this is a continuation of the prior bullish uptrend. However, after rising a little more from the
opening, prices stall and bears are able to make a push lower ending the day with a small bearish
candlestick. The third day is required in order to complete the evening star candlestick pattern. If the third
day opened higher, then it would be clear that bulls are still in charge and that this is just a further
continuation higher. However in the chart above, the third day candlestick opened lower and closed the
day having completely eliminated the gains (plus more) of the first day’s bullish candlestick and
completed the evening star candlestick reversal pattern. Thereafter, an eight day downtrend began.

Evening Doji Star Pattern (and Abandoned Baby Top) Candlestick Chart Example

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11/18/2014 Video of Evening Star, Evening Doji Star, and Abandoned Baby Top

An evening doji star candlestick pattern is shown above on the chart of Home Depot (HD). A doji occurs
on the second day and visually shows indecision. As is seen in the chart above, the doji on the second
day of the evening star doji pattern opens above the close of the previous day, having gapped up. The
long upper shadow of the doji shows that during the day bulls were able to push prices higher. However,
the bulls move upward was counteracted equally by the bears, and by the close of the day, prices were
exactly where they had started at the beginning of the day. Clarification of the morning star doji
candlestick pattern occurs on the third day when prices gap down and then fall completely past the price
area of the first day’s bullish candlestick real body.

The chart above is an example of a rare abandoned baby top. To qualify as an abandoned baby top, the
low of the second day must be above the highs of the first and third day; hence, there is truly a gap in the
price action where no trades (i.e. no volume) occurred at those price levels in between.

Evening Doji Star Pattern Candlestick Chart (3rd Day Higher Volume Than 1st Day)

If the third day’s volume exceeds the first day’s volume of the evening star pattern, Steve Nison says this
increases the likelihood that the evening star candlestick pattern is a bottom reversal. The chart above of
Alcoa (AA) shows that the volume prior to the second day of the evening star pattern is falling; however,
on the second, but especially the third day the volume increases, surpassing the volume of the first day.
As a reminder, increased volume generally means more interest by traders at the price levels
representing that particular trading session. In the chart above on the third day of the evening star
pattern, increased volume as well as a gapping down bearish candlestick can be interpreted that many
stock shares were transferred between buyers and sellers and that the sellers had to sell at lower prices

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11/18/2014 Video of Evening Star, Evening Doji Star, and Abandoned Baby Top

in order to get the buyers to buy from them. This fearfulness by sellers to dump many shares and to sell
those shares at lower prices, gives a powerful sign that bears are currently in charge.

Evening Doji Star Candlestick Pattern Creating Area of Future Resistance

Occasionally an evening star pattern can act as a resistance for an area of consolidation after a run up in
prices. The chart above of Johnson and Johnson (JNJ) illustrates how the evening star pattern marked
the future area of resistance. After the previous uptrend and the bullish candlestick of the first day of the
morning doji star pattern, the second day’s doji signaled indecision. Once the bearish candlestick of the
third day rejected the first day’s gain, a line was drawn on the chart by bears where they felt comfortable
selling into. This resistance area was confirmed 23 days later and held.

The opposite of the evening star pattern is the morning star pattern .

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 5/5
 Gravestone Doji Candlestick Chart

Gravestone Doji Candlestick

The gravestone doji is a top reversal candlestick. A gravestone doji is a specific doji where the open
and close are at the bottom of the candlestick and the candlestick has a long upper shadow with no
lower shadow (a very small lower shadow does not necessarily void the pattern). At the start of the day,
bulls are able to continue the prior uptrend and push prices higher; however during the day, a price is
reached where bears take over control and push prices back to where the day started. According to
Nison (1991, p. 159), the longer the upper shadow and the higher the price level, the more bearish the
gravestone doji becomes. Though the gravestone doji is a specific form of the shooting star formation,
Nison (1991, p. 161) states that the gravestone doji is more bearish than the shooting star candlestick.

The opposite of the gravestone doji is the dragonfly doji.

Gravestone Doji Candlestick Chart Example

11/19/2014 Gravestone Doji Candlestick Chart Video

The chart above of the Dow Jones Industrial Average ETF (DIA) shows a gravestone doji marking the top
of the uptrend. Notice how the high of the upper shadow of the gravestone doji marks an area of
resistance that is not penetrated by future days.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 2/2
 Hammer Candlestick Chart Pattern

Hammer Candlestick

The Hammer candlestick is a bullish reversal pattern that develops during a downtrend. According to
Nison (1991) the Japanese word for this candlestick pattern is "takuri" which roughly translates to "trying
to gauge the depth of the water by feeling for its bottom" (p. 29). The long lower shadow, that by
definition should be twice the height of the real body, is an area where bears were able to push prices
lower, but met resistance by bulls that were able to push prices back toward the upper end of the
candlestick.

The hammer should have no upper shadow, but can have an upper shadow if it is relatively
small.
The real body should be at the top of the candlestick trading range. This real body can be bullish
or bearish, but preferably bullish.
The lower shadow should be at least twice the height of the real body.
An example of a computer charting package definition of a hammer is given next (ThinkorSwim, 2011):

The real body of the hammer is 30% of the average real body height over the past 20 trading
sessions.
The lower shadow must be at least 2 times the height of the real body.
11/19/2014 Video: Hammer Candlestick Chart Pattern

The trend over the past 3 trading sessions is downward.

If the real body of the hammer is bullish it can be inferred from the candlestick that bears were able to
push prices down earlier in the trading session, but bulls were able to counterattack, eventually raising
prices to a new high for the trading session. This could be interpreted as bullish for the future.

Longer Lower Shadow is More Bullish

Steve Nison (1991) claims that "the longer the lower shadow, the shorter the upper shadow and the
smaller the real body the more meaningful the bullish hammer. . .it is slightly more bullish if the real body
of the hammer is [bullish]" (p. 29).

Hammer Candlestick Chart Example

The chart above of the Nasdaq 100 ETF shows a downtrend that is ended by a hammer with a long
lower shadow. The long lower shadow illustrates the market seeking out an area of support which it finds
when bulls begin buying and pushing prices up towards the open. A suggested confirmation candle
closes higher than the hammer's close and an uptrend commences.

Hammer Testing Upward Trend Line

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11/19/2014 Video: Hammer Candlestick Chart Pattern

The hammer candlestick pattern is often seen testing support lines and trend lines to verify their strength.
Often the long lower shadow of a hammer pierces through the support or trend line, but the bears are
unable to close below those areas of support; instead, bulls are able to push prices higher and close
above the area of support and thus keeping the support line or uptrend intact.

The following chart of the S&P Mid-Cap 400 SPDR ETF (MDY) shows an upward sloping price channel.
The blue line going down from top left to bottom right illustrates that prices were moving from the top part
of the price channel to the bottom part of the price channel, thus fulfilling the requirement that a hammer
candlestick is only valid if it occurs after a downtrend. The lower shadow of the hammer pierced below
the bottom of the upward sloping price channel. However, by the end of the day, the bulls pushed prices
back above the price channel closing the day at the high and preserving the integrity of the support line.

Nison Aggressive Buy Signal

For aggressive traders, Nison (1994) suggests going long right after the hammer candlestick appears.
He suggests placing a stop loss under the low of the hammer. In contrast, for less aggressive traders,
Nison suggests that traders wait until prices retest the hammer's support area and then buy (p. 57).

The chart above of the S&P Mid-Cap 400 SPDR ETF (MDY) shows an example of where only the
aggressive hammer buying method would have worked. A trader would buy near the close of the day
when it was clear that the hammer candlestick pattern had formed and that the prior support level had
held. If the trader had waited for prices to retrace downward and test support again, the trader would
have missed out on a very profitable trade.

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11/19/2014 Video: Hammer Candlestick Chart Pattern

Rhoads Next Day Open Confirmation Buy Signal

Rhoads (2008) suggests waiting until the next trading session's opening price to determine whether to
buy. If the second day opening price is greater than the hammer candle's closing price then go long, if
the open is lower than the hammer candlestick's closing price then abandon the hammer candlestick
chart trade signal (p. 119).

A hammer candlestick appeared on the chart of Exxon Mobil (XOM) after six prior days of bearish
candlesticks and reaching a historical support area. By being aggressive, a trader could buy the close of
the hammer candlestick formation and place a protective stop loss order at the low of the hammer
candlestick. However, by being patient and waiting for the opening price of the day after the hammer
candle to be above the closing price of the hammer, a trader would have prevented a quick one-day
1.7% loss.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 4/4
 Hanging Man Candlestick Pattern

Hanging Man

The hanging man candlestick is a bearish trend reversal pattern that occurs during an uptrend and can
signal the top of that uptrend. The long lower shadow of the candle signifies that bears were able to push
prices down during the day showing that there is some vulnerability to the downside. However, the bulls
were able to bring prices back up to close roughly where the trading session started. It is important to
wait for confirmation that the trend has indeed changed to bearish. This confirmation occurs when the
next trading session’s close is below the hanging man’s real body (Nison, 1994, p. 60). If the next trading
session’s close is above the hanging man, then the hanging man candlestick pattern is void.

The hanging man candlestick is defined next:

Usually the hanging man has no upper shadow or a very small upper shadow.
The real body should be at the top of the candlestick trading range. The real body can be bullish
or bearish, but with the hanging man it is preferable to be bearish.
The lower shadow of the hanging man should be at least two times the height of the real body.
The defaults for the hanging man candlestick pattern in a typical computer charting program are shown
below (ThinkorSwim, 2011):
11/18/2014 Hanging Man Candlestick Pattern Video

The real body of the hanging man is 30% of the average real body height over the past 20
trading sessions.
The lower shadow must be at least 2 times the height of the real body.
The trend over the past 3 trading sessions is upward.
Nison (1991) states: “The longer the lower shadow, the shorter the upper shadow and the smaller the
real body the more meaningful the bearish hanging man. . .it is slightly more bearish if the real body of
the hanging man is black.” The reason it is more bearish if the real body of the hanging man is bearish is
that bulls were unable to return prices back to the level of the open, the bulls actually lost ground for the
day; this suggests that the prior bullish uptrend might be losing power and a trend change could occur
over the next few trading days.

Psychology of Hanging Man Candlestick Pattern

The reason the hanging man candlestick pattern requires a second day confirmation is explained through
market psychology. Usually the most active parts of a trading day is its opening and closing. Since by
definition the opening and closing of the hanging man occur at the top end of the candle, any traders that
bought at the opening and closing are losing money if the next day the trading session opens lower.
Depending upon how severe the bearish candle is to the downside, the traders that bought at the open
or close of the hanging man trading day might give up, especially if an uptrend has been broken, and sell
out at a loss, precipitating a further selloff and confirming that the hanging man was indeed a top. In
contrast, if the day after the hanging man candlestick opens higher, the traders that bought at the open
and close of the hanging man are in winning positions and see no reason to sell because this is just a
continuation of the uptrend prior to the failed hanging man pattern.

Hanging Man Confirmed by Second Day Lower

The chart above of the Dow Jones Industrial Average ETF (DIA) shows an upward price channel topped
with a hanging man candlestick. Notice how the hanging man candlestick opened higher than the top
price channel and closed above the price channel; therefore looking like a breakout has just occurred.
Unfortunately for the bulls, the next day gapped down. As a reminder about the psychology of the
hanging man pattern, traders who bought the open and close are now in a losing position, having fallen

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11/18/2014 Hanging Man Candlestick Pattern Video

for a false breakout. In trading parlance, these traders are “left hanging” and are likely to cut their losses,
thus adding more selling pressure to the ETF. In this example, the hanging man was the beginning of a
multi-month downtrend.

Hanging Man Voided by Second Day Higher

The chart above of the Gold ETF (GLD) shows the price moving steadily higher when a hanging man
appears. However, the next day’s open was higher than the hanging man’s close and the next day’s
bullish candle closed higher than the hanging man’s high. This obviously does not conform to the
common rule of requiring the second day candle to open below the real body of the hanging man
candlestick and thus voids the hanging man reversal signal.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 3/3
 High Price and Low Price Gapping Play Candlestick Pattern

High Price Gapping Play Candlestick Chart Bullish Continuation Pattern

A high price gapping play occurs when there is a strong bullish candlestick followed by a few small
body candlesticks that act as a period of consolidation, and then completed by a strong bullish
candlestick that gaps up from the small real body consolidation area. Nison (1991, p. 132) specifically
states that the small real body consolidation should not be made up of more than eleven candlesticks.

Low Price Gapping Play Candlestick Chart Bearish Continuation Pattern

11/18/2014 High Price and Low Price Gapping Play Candlestick Pattern Video

A low price gapping play occurs when a consolidation area of small real body candlesticks follows a
bearish downtrend and then another bearish candlestick gaps down below the small real body
candlestick consolidation area which continues the downtrend.

High Price Gapping Play Candlestick Chart Example

An example of the high price gapping play is shown on the chart above of Bank of America (BAC). A
large bullish candlestick is followed by four small real body candlesticks creating an area of
consolidation. Thereafter, a large bullish candlestick gaps up from the area of consolidation and resumes
the upward trend.

Low Price Gapping Play Candlestick Chart Example

The chart above of the Dow Jones Industrial Average ETF (DIA) illustrates a low price gapping play
pattern. After a large bearish candlestick, three small body bearish candlesticks create a period of
consolidation. The trend downward continues when a large bearish candlestick gaps below the area of
consolidation.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.

[Link] 2/3
11/18/2014 High Price and Low Price Gapping Play Candlestick Pattern Video

Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

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 Inverted Hammer Candle Pattern

Inverted Hammer Candlestick

The inverted hammer is similar to the hammer in that it occurs after a downtrend and is a bottom
reversal pattern. The inverted hammer has a small real body, either bullish or bearish, and has a large
upper shadow with a small or no lower shadow. Most importantly, a trader should wait until the following
trading session for confirmation. Signs of confirmation of the inverted hammer candlestick are: the next
trading session gaps up or the next day is a strong bullish candlestick.

Psychology of Inverted Hammer

An explanation of why it is important to wait for confirmation of higher prices after an inverted hammer is
explained with market psychology. Often the opening and closing of a session of trading has the highest
volume. When bears go short at the opening and closing times of the session and the next trading
session gaps up and moves higher, these shorts are now in a losing position. The higher the prices of
the trading session after the inverted hammer go, the more the shorts lose money and the more likely
they will buy to cover their shorts, this adds to the buying pressure pushing prices even higher.

Inverted Hammer Candlestick Chart Example

11/18/2014 Video of Inverted Hammer Candle Pattern

The chart above of the S&P Mid-Cap 400 ETF (MDY) illustrates a bottom reversal off of an inverted
hammer candlestick pattern. The pattern is preceded by a multi-week downtrend. The day prior to the
inverted hammer is a bearish candlestick. The inverted hammer candlestick opens lower, but then bulls
are immediately able to push prices higher. However, the bears completely reject the bullish gains and
the price closes where it began for the day. It is important to note that even though the inverted hammer
candlestick is on the chart, at this point the inverted hammer pattern is not complete. The following day
should confirm higher, which it does. The day after the inverted hammer candlestick, prices gap
significantly higher and move higher for the rest of the day, creating a large bullish candle. Those traders
who went short the day of the inverted hammer are all in losing trades. The trend reversed off the
inverted hammer pattern and prices enjoyed a multi-week price uptrend.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 2/2
 Bullish and Bearish Kicking Pattern

Bullish Kicking Candlestick Pattern

The kicking candlestick pattern is a two candlestick reversal pattern that begins a new trend opposite to
the trend previous. A bullish kicking pattern occurs after a downtrend. The first day candlestick is a
bearish marabozu candlestick (a bearish candlestick with little to no upper or lower shadow, where the
price opens at the high of the day and closes at the low of the day). The second day gaps up massively
and opens above the previous day’s opening price. This second day candlestick is a bullish marabozu (a
bullish candlestick with little to no upper or lower shadow, where the price opens at the low of the day
and closes at the high of the day). There is a gap or, as the Japanese refer to it, a window between day
one’s bearish candlestick and day two’s bullish candlestick.

Psychology of Bullish Kicking Pattern

11/19/2014 Bullish and Bearish Kicking Pattern Video Explanation

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With a bullish kicking candlestick pattern the first day’s bearish candlestick is a sign that bears are
completely in charge. However the large gap up the next day is a substantial change in market
psychology. The bulls were able to eliminate all losses obtained by the bears the previous day plus add
further gains with the gap up and long bullish candlestick. What makes this reversal so potent is that an
entire day of bearish shorts placed on day one is now losing money. When these shorts capitulate and
are forced to buy back these shorts, even more buying pressure will be added to the market pushing
prices up even further.

Bearish Kicking Candlestick Pattern

A bearish kicking pattern occurs after an uptrend and signals a reversal for a new downtrend. The first
day candlestick is a bullish marabozu candlestick. The second day gaps down massively and opens
below the previous day’s opening price. This second day candlestick is a bearish marabozu. There is a
gap between day one’s bearish candlestick and day two’s bullish candlestick.

Psychology of Bearish Kicking Pattern

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11/19/2014 Bullish and Bearish Kicking Pattern Video Explanation

The bearish kicking candlestick pattern signifies a massive change in market sentiment. The first day of
the pattern is a strong bullish candlestick signaling the bulls are in charge. Nevertheless, the next day is
a complete reversal when bears push prices past the previous day and then some. All longs placed on
the first day’s bullish candlestick are now losing money and when these bulls decide to take their losses,
even more selling will take place pushing prices down even lower.

Bullish Kicking and Bearish Kicking Candlestick Chart Example

The chart above of the Silver ETF (SLV) shows both a bullish kicking candlestick pattern starting a new
uptrend and then a bearish kicking pattern starting a new downtrend. The bullish kicking pattern starts
with a bearish candlestick. The following day is a complete reversal when a large gap up and bullish
candlestick appears. By the close of the bullish candlestick on the second day of the bullish kicking
pattern, all traders from the previous three days who went short are now in losing trades. When those
traders buy to cover their shorts, the buying pressure should push prices even higher, which on the chart
above did indeed happen. The bearish kicking candlestick pattern on the same chart above occurred
after an uptrend and subsequent period of consolidation. The first day of the bearish kicking pattern was
a bullish candlestick. The second day was a bearish candlestick that gapped down on the opening past
the open of the first day’s bullish candlestick. It is important to note that all traders on the previous day’s
bullish candlestick that went long are now in a losing trade. In fact, the second day of the bearish kicking
candlestick pattern was such a large bearish candlestick, that any trader that went long on the previous
nine days and was still holding their long position would now be in a losing trade; that is a lot of traders
who will need to sell to get out of their long position. A steep downtrend on the chart above illustrated the

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11/19/2014 Bullish and Bearish Kicking Pattern Video Explanation

selling pressure of those traders who sold out of their losing trades.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 4/4
 Morning Star, Morning Doji Star, and Abandoned Baby Bottom

Morning Star Candlestick Pattern

The Morning Star and Morning Doji Star are three day bottom reversal patterns. Just as the morning on
earth predicts that the sun will rise, the morning star candlestick pattern suggests that prices will rise.
The first day of the morning star pattern consists of a long bearish candlestick after a previous
downtrend. The second day candlestick gaps down, therefore the candlestick opens at a lower price
than the first day’s closing price. This second day candlestick must be a small candlestick and can be
either bullish or bearish; however the key is that the real body of the second day is below the real body
of the first day.

The third day of the morning star pattern is a large bullish candlestick that closes into the first day’s real
body. The charting package of ThinkorSwim (2011) requires that the third day candlestick close above
the midpoint of the first day’s candlestick real body. In addition, it is best that the third day’s candlestick
gap up, but this is not absolutely required for the pattern’s validity.

Nison (1994, p. 118) suggests buying after the completion of the morning star pattern.

Morning Doji Star Candlestick Pattern

11/19/2014 Video: Morning Star, Morning Doji Star, and Abandoned Baby Bottom

The difference between the morning star and morning doji star is that on the second day, the
candlestick is a doji for the morning doji star candlestick pattern. As a quick summary, a doji occurs
where the opening and closing prices are roughly equal.

Abandoned Baby Bottom

If a doji occurs on the second day and the doji’s high price is less than the first and third day’s low price,
then a very specific and rare form of the morning doji star has occurred and is called an abandoned
baby bottom.

Psychology of Morning Star Candlestick Pattern

The psychology of the morning star candlestick pattern is described next. The first day of the morning
star candlestick is a large bearish candlestick that reinforces the prior continual downtrend. The second
day candlestick opens lower than the prior day’s close, thus gapping down and once again reinforcing
that the bears are in control of the market. However, the bears are not able to push prices downward
much further. The doji, or small real body of the second day shows there is a stalemate between the
bulls and the bears. Only after the third day’s bullish candlestick do the bulls show that they are now in
control of the market.

Traits of the Morning Star that Increase Likelihood of Trend Reversal

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11/19/2014 Video: Morning Star, Morning Doji Star, and Abandoned Baby Bottom

Nison (1991, p. 63) points out attributes of a morning star that increase the likelihood of a trend reversal:

There is indeed a gap between the first day’s candlestick real body and the second day’s
candlestick real body and a gap between the second day’s candlestick real body and the third
day’s candlestick real body.
The higher the bullish candlestick on the third day closes into the price levels of the first day’s
bearish candlestick, the stronger the showing of the bulls.
There is low volume for the first day’s bearish candlestick, and in contrast, there is high volume
on the third day’s bullish candlestick. High volume reinforces that bulls are serious about having
reversed the previous bearish trend.

Morning Star Pattern Candlestick Chart Example

The chart above of the Energy SPDR ETF (XLE) is a textbook example of a morning star candlestick
pattern. The previous 10 days could be characterized as a downtrend, with the first day of the morning
star pattern being a large bearish candlestick (in fact a bearish marubozu candlestick). The second day
gaps down and opens below the closing price of the first day. This is even more proof that the bears are
in charge of the market. However, once prices reach the uptrend support illustrated by the blue line
above, prices stall and bulls are able to make a small push higher. It is important to emphasize that the
third day is required in order to complete the morning star candlestick pattern. If the third day opened
lower and broke the uptrend support, then the bears would be in control once again. However, the third
day candlestick opened higher and closed the day having penetrated over 50% into the first day’s
bearish candlestick real body and completed the morning star candlestick reversal pattern. If a trader
were to buy using this chart, they would have enjoyed nine bullish candlesticks over the next 10 days.

Morning Star Candlestick Pattern (3rd Day Higher Volume Than 1st Day)

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11/19/2014 Video: Morning Star, Morning Doji Star, and Abandoned Baby Bottom

One of the traits Steve Nison says increases the likelihood that a morning star candlestick is a bottom
reversal, is that the third day’s volume should exceed the first day’s volume of the morning star pattern.
Notice on the chart above of McDonalds (MCD) that the volume prior to the third day of the morning star
pattern is falling; however, on the third day the volume increases, surpassing the volume of the first and
second day. To quickly summarize, generally increased volume means increased attention by traders at
the price levels representing that particular trading session. In the chart above on the third day of the
morning star pattern, increased volume as well as a bullish candlestick can be interpreted that many
stock shares were transferred between buyers and sellers and that the buyers had to buy at higher
prices in order to get the sellers to sell to them. This eagerness and impatience by buyers to buy many
shares and to pay higher prices for these many shares is a powerful sign of the bulls’ bullishness.

Morning Doji Star (and Abandoned Baby Bottom) Example

An example of a morning doji star candlestick pattern is illustrated in the chart above of Apple (AAPL).
The morning doji star pattern follows a similar format to the morning star pattern with the exception of the
second day candlestick being a doji rather than a small bullish or bearish candlestick. A doji is a great
visual representation of indecision. As is seen in the chart above, the doji on the second day of the
morning star doji pattern opens far below the close of the previous day, having gapped down. The long
lower shadow of the doji shows that during the day bears were able to push prices far lower. Similarly,
during the day, the bulls were able to push prices higher from the open of the day. Nevertheless, the
bears move down was counteracted equally by the bulls, and the bulls move upward was counteracted
equally by the bears, and eventually by the close of the day, prices were exactly where they had started

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11/19/2014 Video: Morning Star, Morning Doji Star, and Abandoned Baby Bottom

at the beginning of the day.

Clarification only comes on the third day of the morning star doji candlestick pattern when prices rise
over half-way into the price area of the first day’s bearish candlestick real body. Technically, the third day
candlestick in the chart above is not a large bullish candlestick; in fact it is yet another doji. Even so,
using Nison’s criteria for the increased likelihood of trend reversals of the morning star pattern, the third
day doji candlestick gapped higher and the close of the candlestick penetrated about two-thirds of the
way into the first day’s bearish candlestick.

Not only is the chart above an example of a morning doji star candlestick pattern, it is also an example of
a rare abandoned baby bottom. To qualify as an abandoned baby bottom, the high of the second day
must be below the lows of the first and third day; hence, there is truly a gap in the price action where no
trades (i.e. no volume) occurred at those price levels in between.

Morning Doji Star (2nd Day is 2 Dojis) Candlestick Chart Pattern

It is possible for a morning star or a morning star candlestick pattern to consist of more than three
candlesticks. Notice in the chart above of the Energy SPDR ETF (XLE) how the two doji candlesticks
reveal the very same idea – the bulls and the bears are indecisive. Since the doji candles of both days
could easily be combined into one candlestick without any loss of information, the above chart is easily
considered a morning doji star pattern. The first day of the pattern was a large bearish candlestick, the
“second day” was an indecisive doji day that was a gap down from the first day’s close, and the third day
was a bullish candlestick that gapped up from the “second day’s” close and that penetrated over 50% of
the way up into the real body of the first day’s candlestick. As a side note, the piercing pattern that
occurred 15 days prior to the morning doji star pattern suggested a support level (shown by the blue
line). Both dojis closed above that support line, giving even more confidence in the bullishness of this
chart’s morning doji star candlestick pattern.

The opposite pattern of the morning star pattern is the evening star pattern.

Works Referenced

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11/19/2014 Video: Morning Star, Morning Doji Star, and Abandoned Baby Bottom

Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 6/6
 Piercing Pattern

Piercing Pattern

The Piercing Pattern is a trend reversal pattern that appears at the bottom of a downtrend. The
candlestick on the first day is a long bearish candlestick and the second candlestick is long bullish
candlestick. The second day candlestick opens below the previous day’s low and ends up closing within
the price range of the previous day’s real body. It is a firm rule that the bullish candlestick should
penetrate and close more than 50% into the previous day’s real body (Nison, 1991, p. 49). For those
familiar with the bullish engulfing pattern, the piercing pattern is essentially an incomplete bullish
engulfing pattern, since a bullish engulfing pattern’s second day bullish candlestick penetrates and
closes more than 100% past the real body of the first day’s bearish candlestick.

With the piercing pattern, the large bearish candlestick confirms the previous downtrend and makes a
new low. The next day the price gaps downward making yet another new low, thus far the bears have
dominated. Nevertheless, instead of the price continuing to go lower, the price begins to rise and rises so
far that it ends up erasing over half of the bears’ movement downward on the bearish candle on the
previous day. Essentially the new lows of the previous downtrend have been rejected, and the bulls are
ready for a new run higher.

The piercing pattern is voided if future candlesticks go below the second day bullish candlestick low.
11/19/2014 Piercing Pattern Video Description

The opposite of the piercing pattern is the dark cloud cover pattern.

Traits that Increase a Piercing Pattern's Significance

Characteristics that increase a Piercing Pattern’s significance are given below (Nison, 1991):

The greater the penetration of the second day’s bullish candlestick into the price levels of the
first day’s bearish candlestick, the stronger the pattern and the more similar it becomes to a
bullish engulfing pattern.
Reason: By viewing the second day’s bullish candle as a rejection of the first day’s bearish
candle, the more the second day’s bullish candlestick penetrates into the price levels of the first
day’s bearish candlestick the more powerful the bulls are showing themselves to be. 50% is a
half rejection of the bears, 100% is a complete rejection of the bears, thus the higher the
percentage of penetration the stronger the bulls rejection of the current downward trend.
A major support area is penetrated when the second day opens below the support area but then
prices rise and close above the support area.
Reason: A failed breakout below support is a sign to the bears that they have failed and the
confirmation that the support is still intact gives confidence to the bulls to begin buying once
again.
High volume accompanies the second day bullish candlestick’s opening.
Reason: If there is large volume on the opening after a gap down from the prior day, there are
many traders who are now short. When the prices begin moving upward, the many traders who
are short are now in trouble and might begin to buy to cover which adds to the bullish pressure
on prices to go higher.

Blended Candle Analysis Piercing Pattern = Hammer

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11/19/2014 Piercing Pattern Video Description

Blended candle analysis combines multiple candlesticks into one candlestick. In this case, the piercing
pattern (open of day 1 candle, close of day 2 candle) is combined and results in a hammer candlestick,
which is generally interpreted as being bullish.

Piercing Pattern Candlestick Chart Example

An excellent example of a piercing pattern is shown above of the Silver ETF (SLV). Prior to the piercing
pattern, the trend is down for a month and a half. The first day of the piercing pattern is a long bearish
candlestick that closed creating yet another new low for the downtrend. The following day, which is the
second day of the piercing pattern, opened below the low of the first day. This is yet another new low for
the downtrend. However, after the opening low, the price reversed upward throughout the day
penetrating about two-thirds of the way up into the first day bearish candlestick’s prices. Afterwards, a
month long uptrend began.

Piercing Pattern Confirms Support

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11/19/2014 Piercing Pattern Video Description

A few weeks earlier, the Energy SPDR ETF (XLE) established an area of support, illustrated on the chart
above as a blue line. The bearish candlestick of the first day of the piercing pattern made a new low for
the recent downtrend; but the bearish candlestick did not fall below the area of support. The next day,
the second day of the piercing pattern, gapped lower and proceeded to fall toward the area of support.
However, the bears failed to penetrate support. Thereafter, bulls were able to eliminate about two-thirds
of the prior day’s bullish candlestick real body gains. An uptrend commenced thereafter.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 4/4
 Rising and Falling Three Methods Candlestick Pattern

Rising Three Methods Bullish Candlestick Continuation Pattern

The bullish rising three methods is a five candlestick bullish continuation pattern. The first candlestick
is a large bullish candlestick that takes place during an uptrend. Then a group of two to four small body
candlesticks (either bullish or bearish) retreat within the price range established by the first day’s real
body bullish candlestick. The final candlestick of the pattern is another large bullish candlestick that
closes above the first day’s closing price. Technically, the last day’s bullish candlestick should gap up
above the close of the previous day’s small candlestick. Nison (1991, p. 137) suggests that a bullish
rising three methods pattern is more significant if the volume on the first day’s bullish candlestick and the
last day’s bullish candlestick have higher volume than the middle days’ small candlesticks.

Falling Three Methods Bearish Candlestick Continuation Pattern

11/19/2014 Rising and Falling Three Methods Candlestick Pattern Video

The bearish falling three methods is a five candlestick bearish continuation pattern. The first
candlestick is a large bearish candlestick that takes place during a downtrend. Then a group of two to
four small body candlesticks (either bullish or bearish) slowly ascend within the price range established
by the first day’s real body bearish candlestick. The final candlestick of the pattern is another large
bearish candlestick that closes below the first day’s closing price. The last day’s bearish candlestick
should gap down below the close of the previous day’s small candlestick. Nison (1991, p. 137)
advocates that a bearish falling three methods pattern is more significant if the volume on the first day’s
bearish candlestick and the last day’s bearish candlestick have higher volume than the middle days’
small candlesticks volume.

Rising Three Methods Candlestick Chart Example

The chart above of Google (GOOG) illustrates a bullish rising three methods continuation pattern. The
first day is a large bullish candlestick. The second day is a small spinning top that closes within the real
body of the first day’s bullish candlestick. The third day is another small spinning top that is lower than
the previous day’s real body. The fourth day is a small doji and it also closes within the real body of the
first day. The fifth day of the pattern is a large bullish candlestick that opens above the close of the fourth
day’s doji and ends the day having closed above the close of the first day’s bullish candlestick. The chart
of Google proceeds to continue its previous trend higher.

Rising Three Methods with Volume Example

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11/19/2014 Rising and Falling Three Methods Candlestick Pattern Video

The chart above of Exxon Mobil (XOM) illustrates how volume on the first and last day’s bullish
candlestick being higher than the volume of the middle day’s candlesticks suggests that the rising three
methods pattern had validity. The lower volume on the middle small bearish candlesticks suggests that
the market was just resting before the next day’s higher volume large bullish candlestick.

Falling Three Methods Candlestick Chart Example

The chart above of 3M (MMM) shows a falling three methods bearish continuation pattern. Notice how
the large bearish candlestick broke below the lows of the previous small candlesticks’ consolidation area
and made a new low. Following the large bearish candlestick, three bullish small candlesticks, all closing
within the first day’s real body, appeared. The final day of the pattern was a large bearish candlestick
that opened below the close of the previous day’s candlestick and ended the day with a close below the
close of the first day’s bearish candlestick.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 3/3
 Shooting Star Candlestick Chart Pattern

Shooting Star Candlestick

The shooting star candlestick pattern occurs after an uptrend and bullish candlestick and acts as a
signal of a potential top. According to Nison, the shooting star is not a major reversal signal like the
evening star pattern (1991, p. 70). Technically, the shooting star candlestick pattern is a two day pattern,
the first day is a bullish candlestick and the second day is the actual shooting star candle. The shooting
star candlestick consists of a small real body at the bottom of the candlestick with a long upper shadow
and little to no lower shadow. The real body may be either bullish or bearish. It is best if the real body of
the shooting star is higher than the real body of the prior day’s candlestick real body, but this is not a
requirement. The shooting star is sometimes referred to as the bearish inverted hammer.

A more specific and technical definition of a shooting star is given by ThinkorSwim (2011): The prior
three days must be an uptrend, the first day of the shooting star pattern must be a bullish candlestick, the
real body of the second day should be less than 30% of the height of the prior 20 candlesticks’ real
bodies height, and the upper shadow is two times the height of its real body.

Psychology of Shooting Star

11/19/2014 Video of Shooting Star Candlestick Chart Pattern

During an uptrend, the bulls are in power. On the day of the shooting star, bulls open the day with a gap
up from the prior day’s close and continue to push prices higher throughout the day. However, bears are
able to counter the bulls and push prices roughly to where prices started for the day. The upper shadow
of the shooting star candlestick signifies an area where bears are willing to sell and powerful enough to
push prices downward; because of this, the upper shadow of the shooting star could become an area of
resistance for the future.

Shooting Star Sell/Short Suggestion

Rhoads (2008, p. 165) gives an example of shorting on the close of the shooting star candlestick and
also suggests placing a stop loss on the high of that same shooting star candlestick.

Shooting Star Candlestick Chart Example

The chart above of the Nasdaq 100 ETF (QQQ) shows an uptrend that peaks with a shooting star
candlestick pattern. Prior to the shooting star pattern, a multi-week uptrend occurred. The first day of the
pattern was a bullish candlestick. The second day of the shooting star candlestick pattern began by
gapping higher, having opened at a price above the previous day’s close. The bulls continued the march
upward making yet another new high for the uptrend. However, the gains of the day were completely
erased by the bears and the day ended up being a bearish candlestick. A multi-week downtrend
proceeded after the shooting star pattern.

Shooting Star Establishing Area of Future Resistance

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11/19/2014 Video of Shooting Star Candlestick Chart Pattern

The long upper shadow of a shooting star candlestick pattern gives clues that an area of resistance is
being established. The chart above of the S&P Mid-Cap 400 ETF (MDY) illustrates how the upper
shadow of a shooting star where bears were able to repel the bulls advance, established an area of
resistance for multiple weeks to come.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 3/3
 Spinning Tops and High Wave Candlesticks

Spinning Tops Candlesticks

Spinning tops are candlesticks with small real bodies and indicate that neither the bulls nor the bears are
in control. Spinning tops can act as a warning that after a strong move upward, bulls are losing strength.

High Wave Candlesticks

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High wave candles are like spinning tops, but they have long upper and lower shadows. According to
Nison (2003, p. 29), "if spinning tops translate into indecision on the part of bulls and bears, high wave
11/19/2014 Video Description of Spinning Tops and High Wave Candlesticks

candles translate into downright confusion."

Location of Spinning Tops and High Wave Candles

Spinning tops and high wave candles are only applicable after an uptrend or downtrend. Whereas a long
bullish candlestick with small shadows shows that the bulls are in charge, a spinning top or high wave
candlestick after bullish candles in an uptrend indicates that the bulls are not in control like they were
before and the upward trend might turn into a neutral period of consolidation or even reverse downward.
Similarly, when a string of long bearish candlesticks forms a downtrend, it is clear that the bears are in
charge. However, when spinning tops or high wave candles appear after a downtrend, it is clear that the
bears no longer are completely in charge and a period of consolidation or reversal upward could be
expected.

Spinning Tops Candlestick Chart Example

The chart above of the S&P 500 ETF (SPY) shows that after a strong move higher with three bullish
candlesticks (three white soldiers), two spinning tops appear. These spinning tops suggest that there is
indecision among the bulls and the bears. After the second spinning top, a bearish candlestick appears
and signals that the decision has been made; the bears are in charge and the bears successfully begin a
move downward.

High Wave Candles Candlestick Chart Example

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11/19/2014 Video Description of Spinning Tops and High Wave Candlesticks

The chart above of the Energy SPDR (XLE) shows the indecisiveness of the high wave candlesticks at
the bottom of a downtrend. Each of the four bearish candlesticks had either a large upper or lower
shadow showing that there was much uncertainty in the market when prices reached the area of those
high wave candles. Only when a large bullish candlestick moved higher was a clear bottom formed and a
new uptrend begun.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

[Link] 3/3
 Three Black Crows with Video Candlestick Chart Pattern

Three Black Crows Candlestick Pattern

The three black crows candlestick pattern suggests lower prices if it occurs after an uptrend. Each of
the three black crows should be a bearish candlestick that closes near the lows of the day. The open of
each of the black crows should be within the real body of the prior day's real body. A rare variant of the
three black crows candlestick is the identical three crows, which occurs when the opening of the bearish
candlesticks are roughly the same price as the close of the previous day. Nison (1991, p. 101) states that
the identical three crows is an especially bearish pattern.

Three Black Crows Candlestick Chart Example

11/19/2014 Three Black Crows with Video Candlestick Chart Pattern

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The chart above of the Silver ETF (SLV) shows a three black crow pattern forecasting a reversal of the
prior uptrend. Prior to the three black crows, there was a five day uptrend made up of bullish
candlesticks. The uptrend ended, however, when the market gapped up on the sixth day and proceeded
to fall and eliminate the gains of the fifth day of the uptrend. As is typical with the three black crow
pattern, each of the bearish candlesticks opened beneath the previous day’s open and then closed
beneath the real body of the previous day’s bearish candlestick.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

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 3 Mountain & 3 Buddha Top _ 3 River & Inverted 3 Buddha Bottom

Three Mountain Top or Triple Top Candlestick Chart Pattern

The three mountain top or triple top occurs when prices attempt three different times to make a new high
and fail.

Three Buddha Top or Head and Shoulders Pattern

The three Buddha top or the head and shoulders pattern is a specific form of the three mountain top
where the middle attempt at a new high is higher than the first and third attempts at a new high. Nison
11/19/2014 Video 3 Mountain & 3 Buddha Top | 3 River & Inverted 3 Buddha Bottom

(1991, p. 107) suggests that the third mountain of the pattern be confirmed with a bearish candlestick
indicator.

Three River Bottom or Triple Bottom Candlestick Chart Pattern

The three river bottom or triple bottom occurs when prices attempt three different times to make a new
low and fail.

Inverted Three Buddha or Inverted Head and Shoulders Pattern

The inverted three Buddha or inverted head and shoulder occurs when the middle attempt at lower
prices is lower than the first and third attempts at lower prices. Nison (1991, p. 108) states that in order
for the three river bottom or inverted three Buddha pattern to be confirmed, the peak of the troughs
should be exceeded.

Three Buddha Top Chart Example

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11/19/2014 Video 3 Mountain & 3 Buddha Top | 3 River & Inverted 3 Buddha Bottom

The chart above of the S&P 500 ETF (SPY) illustrates a three Buddha top. The main idea is that prices
on the third buddha failed to make an equal or higher high than the middle Buddha. In fact bulls were
unable to come close to the first or second Buddha high. Once prices fell below the lows between the
first and second Buddha and the second and third Buddha (the lowest blue line on the chart), bulls were
completely rejected and prices began to fall downward.

Inverted Three Buddha Bottom Example

The chart above of Hewlett Packard (HPQ) illustrates an inverted three Buddha bottom. The first low
was created by a bullish counterattack line, the middle low was created by a hammer, and the third and
final inverted Buddha was created by a bullish engulfing pattern. Once prices exceeded the peaks in
between the first and second inverted Buddha and the second and third inverted Buddha, the inverted
three Buddha bottom was confirmed.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

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 Three Advancing White Soldiers Candlestick Chart

Three Advancing White Soldiers Candlestick Pattern

The three advancing white soldiers is a bullish candlestick pattern that appears at areas of low prices
and suggests higher prices ahead. Each of the three bullish candlesticks should open at a price level
that is within the previous bullish candlestick’s real body and the bullish candlestick should close near its
own high. Essentially, the open, high, low, and close of the bullish candlesticks of the three white
soldiers should be higher than the previous day’s bullish candlestick open, high, low, and close.

Three White Soldiers Candlestick Chart Example

11/19/2014 Three Advancing White Soldiers Candlestick Chart Video

The chart above of the Nasdaq 100 ETF (QQQ) shows a three white soldiers candlestick chart example.
The three bullish candlesticks burst upward from the area of support (shown with the blue line). Notice
how each of the three bullish candlesticks closes near its own high price, thus having a very small upper
shadow. Also, each of the candlesticks makes a higher high and a higher low than its previous
candlestick’s high and low.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

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 Tower Top and Tower Bottom Candlestick Chart

Tower Top Candlestick Pattern

The tower top is a reversal pattern that occurs at high price levels. Typically one or more long bullish
candlesticks are followed by a few smaller real body candlesticks and then the pattern is completed with
one or more large bearish candlesticks. The bullish candlestick(s) on the left side and the bearish
candlestick(s) on the right side make up the two sides of the tower, and the small real body candlesticks
make up the roof of the tower.

Tower Bottom Candlestick Pattern

11/19/2014 Tower Top and Tower Bottom Candlestick Chart Video

The tower bottom is a reversal pattern that occurs at low price levels. There is one or more long bearish
candlesticks followed by a few smaller body candlesticks and then concluded with one or more large
bullish candlesticks. The bearish candlestick(s) on the left side and the bullish candlestick(s) on the right
side make up the two sides of the tower, and the smaller real body candlesticks make up the floor of the
tower.

Tower Top Candlestick Chart Example

The tower top candlestick pattern is illustrated above on the chart of the Energy SPDR (XLE). A large
bullish candlestick makes a new high for the uptrend and is followed by five relatively small real bodied
candlesticks. The lows made by these small bodied candlesticks were penetrated by the large bearish
candlestick that makes up the right side of the "tower". The chart above was actually a head and
shoulders pattern, where the "head" part of the pattern was created by a bearish tower top formation.

Tower Bottom Candlestick Chart Example

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11/19/2014 Tower Top and Tower Bottom Candlestick Chart Video

The chart above of the S&P 500 SPDR ETF (SPY) shows a large bearish candlestick (left side of the
tower) followed by four relatively smaller bearish candlesticks. The tower bottom pattern is completed by
the large bullish candlestick (right side of the tower) that closed at the same price level that the bearish
candlestick opened five days before.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

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 Tri-Star Top and Tri-Star Bottom Candlestick Chart Pattern

Tri-Star Top Candlestick Pattern

The tri-star candlestick pattern is a top or bottom reversal pattern made up of three dojis. For a tri-star
top, there should be an uptrend followed by a doji. The middle day should be another doji that gaps up
above the prior day’s doji open/close price. The third day should be yet another doji, however this doji is
beneath the open/close of the middle day’s doji.

Tri-Star Bottom Candlestick Pattern

11/19/2014 Tri-Star Top and Tri-Star Bottom Candlestick Chart Pattern Video

A tri-star bottom consists of a downtrend followed by a doji (day one) and another doji (day two) that
gaps down below the prior day’s doji open/close price. The third day is yet another doji, but this doji is
above the open/close of the second day’s doji. It should be noted that the tri-star doji pattern is very rare.

Tri-Star Top Candlestick Chart Example

Though the middle doji on the chart above of the Silver ETF is a small-bodied candlestick, it illustrates
the idea of the very rare tri-star candlestick pattern. After a short, four day move upward, a doji appears,
followed the next day by a small bodied candlestick that makes a slight new high closing. The third day is
followed by another doji that closes lower than the second day’s close. The important concept to
remember is that dojis are signs of indecision and that when dojis appear after a fast move upward, it
could be a sign that the bulls are tired. The tri-star candlestick pattern shows that prices and the bears’
power is slowly rolling over a three day period.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

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 Tweezer Top Candlesticks and Tweezer Bottom Candlesticks

Tweezer Tops and Bottoms

Tweezer tops are multiple candlesticks where the highs of those candlesticks are equal. In contrast,
tweezer bottoms are multiple candlesticks where the lows of those candlesticks are equal. The
candlesticks that create a tweezer top or bottom can be made of real bodies or shadows or dojis.
According to Nison (1991, p. 88), tweezers should not be considered as important reversal patterns in
and of themselves, but should be combined with other candlestick patterns.

Tweezer Top and Bottom Candlestick Chart Examples

The chart above of the Gold ETF (GLD) demonstrates how other candlestick patterns can conform to the
tweezer top and tweezer bottom concept. The first example is a bearish engulfing pattern where the high
of the second day bearish candlestick’s high is equivalent to the previous day’s high. The next is a
harami pattern where the high of the second day’s small bearish candlestick is roughly the same high as
the first day’s bullish candlestick. The next example shows the lows of four candlesticks being equal with
a couple of hammer patterns lower shadows testing support. After that is yet another bearish engulfing
pattern example, that illustrates the high of the second day being equal to the high of the first day. Lastly,
a modified piercing pattern is shown where the lows are equivalent.
11/19/2014 Tweezer Top Candlesticks and Tweezer Bottom Candlesticks Video

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

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 Upside Gap Two Crows Candlestick Chart Pattern

Upside Gap Two Crows Candlestick Pattern

The upside-gap two crows is a three candlestick pattern that occurs in an uptrend and it suggests a
reversal of prices downward. After an uptrend, the first candlestick is a long bullish candlestick. The
second candlestick is a bearish one that gapped up from the close of the first day’s candlestick. The real
body of the second day candlestick should be above the real body of the first day’s candlestick. The third
candlestick is another bearish candle that gaps up from the close of the second day’s candlestick, but
ends the day below the close of the second day’s candle. The third day candle’s real body essentially
should engulf the real body of the second day’s real body.

Psychology of Upside Gap Two Crows

The psychology of the upside gap two crows is explained as follows: The first day bullish candlestick
continues the uptrend higher. The second day of the upside gap two crows gapped up, having opened
the day higher and having generally made a new high for the uptrend. However, prices closed the day
lower, which is unexpected if bulls were still in control. Nevertheless, the bulls could take comfort since
the second day still closed above the close of the first day. The third day is another attempt by the bulls
to make a new high for the uptrend. The bulls gap up above the real body of the second day; however,
11/19/2014 Video of the Upside Gap Two Crows Candlestick Chart Pattern

this bullish sentiment is unable to hold and the bears push prices down below the real body of the
second day. At this point, bulls should be worried because there have been two consecutive days of
attempts at new highs that were rejected by bears. According to Nison (1991, p. 98), if the fourth day of
prices fails to go higher, then a trader should expect lower prices ahead. Nison also suggests that if a
trader goes short, then the trader should place a stop loss on the close above the second bearish
candlestick’s high.

Upside-Gap Two Crows Candlestick Chart Example

The chart above of the Silver ETF (SLV) is a good illustration of the upside-gap two crows candlestick
pattern. The first day of the pattern is a bullish candlestick. The second day gapped up and was a small
bearish candlestick where its real body was above the real body of the bullish candlestick. The third day
of the pattern gapped up yet again, but bears pushed prices lower. The third day’s real body engulfed
the second day’s real body. The fourth day failed to make a new high and suggested that the bull run
was over and that prices should head lower, which they did the next day.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

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 Upside and Downside Gap Tasuki Candle Pattern

Upside Gap Tasuki Candlestick Pattern

The upside-gap tasuki is a three candlestick bullish continuation pattern that occurs during an uptrend.
The first day is a bullish candlestick. The second day is a smaller bullish candlestick that gaps up from
the previous day. The third day is a bearish candlestick that opens within the real body of the second
day and closes below the real body of the second day and fills in some of the gap. It is preferable that the
bullish candlestick of day two and the bearish candlestick of day three be about the same size. According
to Nison (1991, p. 129), the close of the third day’s bearish candlestick is a buy signal. Remember that
gaps or windows act as support for corrections; therefore, buying the third day’s close which is in the
price range of the window, is just betting on the window acting as support and that the upward trend will
continue.

Downside Gap Tasuki Candlestick Pattern

11/19/2014 Video of Upside and Downside Gap Tasuki Candle Pattern

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The downside-gap tasuki is a three candlestick bearish continuation pattern that occurs during a
downtrend. The first day is a bearish candlestick. The second day is a smaller bearish candlestick that
gaps down from the previous day. The third day is a bullish candlestick that opens within the real body of
the second day and closes above the real body of the second day and fills in some of the gap. It is
preferable that the bearish candlestick of day two and the bullish candlestick of day three be about the
same size. Rhoads (2008, p. 241) suggests the close of the third day bullish candlestick as the place to
initiate a short. Once again, the logic being that the window in a downtrend acts as an area of resistance.
The third day bullish candlestick closes in that area of resistance and therefore a trader shorting there is
expecting the resistance to hold and the trend to continue downward.

Upside Gap Tasuki Candlestick Chart Example

The chart above of the Nasdaq 100 ETF (QQQ) illustrates an upside gap tasuki candlestick continuation
pattern. A bullish candlestick (day one) is followed by a gap up and another bullish candlestick (day two).
The third day’s candlestick is a bearish candlestick that used the upper line of the window as support.
Generally, a bullish trader would buy at the close of the third day’s bearish candlestick. On this specific
chart, the trader would have made a very profitable trade to the upside.

Downside Gap Tasuki Example

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11/19/2014 Video of Upside and Downside Gap Tasuki Candle Pattern

The chart above of the Silver ETF (SLV) shows a downward gap tasuki bearish candlestick continuation
pattern. A bearish candlestick (day one) is followed by another bearish candlestick (day two) that gapped
lower. The third day is a bullish candlestick that rose into the price levels of the gap. The third day’s
closing price would be when a trader would go short. The trend continued downward, but not without
another retest of the window acting as resistance.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

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 Windows (Gaps) Candlestick Chart Continuation Pattern

Windows - Japanese Candlestick Term for "Gaps"

A window is the Japanese term for a gap. A window in an uptrend occurs when there is a distance
between the high price of day one and the low price of day two. Therefore, there are price levels at
which no trades between buyers and sellers occur. A window during an uptrend suggests that prices will
move higher; however, very often prices will pull back to the price levels of the window. The window
often acts as an area of support in an uptrend. Nison (1991, p. 120) suggests that pullbacks to price
levels of the window can be used as buying zones. He also states that if prices close below the window
and then continue downward, then that is a sign that traders should sell.

Window in a Downtrend
11/19/2014 Video of Windows (Gaps) Candlestick Chart Continuation Pattern

Similarly, a window in a downtrend occurs when there is distance between the low price of day one and
the high price of day two. A window during a downtrend suggests that prices will move lower; but before
moving lower, often prices will correct and rise to the price levels of the window. Therefore, the window
acts as resistance.

Window in an Uptrend Candlestick Chart Example

The chart above shows four windows (shown with double blue lines) of the Gold ETF (GLD). Each
window shows how the Gold ETF retraced to prices within the price area of the window and that the
window successfully acted as support each time. The first window was a 15 day consolidation that tested
the upper line of the window support. The second window had a large bullish candlestick that propelled
itself off the upper line of the window’s support. The third window had a candlestick’s lower shadow
testing the upper support established by the window. The fourth window lower support line was bounced
off of by a bullish belt hold candlestick. In all four examples, the price level of the window was tested and
was confirmed as an area of support, giving the bulls confidence to move prices even higher.

Window in a Downtrend Candlestick Chart Example

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11/19/2014 Video of Windows (Gaps) Candlestick Chart Continuation Pattern

The bearish chart of Bank of America (BAC) illustrates three windows in a downtrend. In each of the
examples, the window successfully held as resistance when prices tried to rebound higher. The first
window was rejected by a tweezer top pattern that “filled the gap” but then promptly fell from the upper
line of the window’s resistance. The second window’s area of resistance was confirmed by a bearish
engulfing pattern that tested the upper line of the window’s resistance. The third window’s resistance
was reinforced by a dark cloud cover pattern.

Works Referenced
Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

[Link] Home | Candlestick Patterns | Chart Patterns | Contact Us | © Copyright 2012 [Link] (FINance VIDeoS)

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