Disclaimer: The authors of the articles in this guide are simply offering their interpretation of the concepts.
Information, charts or examples
contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy
or sell any security or financial instrument.
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Technical Analysis Tools & Techniques
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3.0 Candlesticks charts
3.1 Introduction to Candlesticks
3.2 Candlestick Formations
3.3 How to Read & Interpret?
3.4 Candlestick pattern recongnition
3.5 Mark support & resistance levels using candlestick chart patterns
3.6 Candlestick Bullish & Bearish Reversal Patterns
3.8 Limitations of candle stick charts
What is Candlestick?
Candlesticks is a chart type plotted using Open, High, Low & Closing Price
High
High
Close
Open
Open
Close
Low
Positive Close
Low
Negative Close
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Why Candlesticks?
Compared to line / bar chart,
candlesticks provide more price
information at a glance
It helps to visually interpret the
relationship between open, high,
low close to analyze the force
between Bulls & Bear
Candlesticks Chart is effectively
used to predict short term price
action
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3.3 How to read and interpret Candlestick Formations
Long White/Green Body
Shows strong buying interest
Indicates that prices advanced significantly from open to close
After extended declines, long white candlesticks can mark a potential turning
point or support level.
If buying gets too aggressive after a long advance, it can lead to excessive
bullishness
Long Black/Red Body
Shows strong selling pressure.
Indicates prices declined significantly from the open
After a long advance, a long black candlestick can be a turning point or mark a
future resistance level.
After a long decline a long black candlestick can indicate panic or capitulation.
Long versus Short Bodies
Longer the body is, more intense the buying or selling pressure.
Short candlesticks indicate less price movement and consolidation
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3.3 How to read and interpret Candlestick Formations
Candlesticks with a long upper shadow, long lower shadow and small body
This formation is called as spinning top representing indecision
Small body shows little
movement from open to
close
Long shadows indicate that
both bulls and bears were
active during the session
Neither buyers nor sellers could win and the result was a standoff
After a long advance or long white candlestick, a spinning top indicates
weakness among the bulls and a potential change or interruption in trend.
After a long decline or long black candlestick, a spinning top indicates
weakness among the bears and a potential change or interruption in trend.
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3.3 How to read and interpret Candlestick Formations
Candlesticks with a small upper and lower shadow with small body
This formation is called as Doji representing Neutral pattern
Small body shows little
movement from open to
close
Short shadows indicate that
both bulls and bears were
inactive during the session
Doji convey a sense of indecision or consolidation
Any bullish or bearish bias is based on preceding price action and future
confirmation.
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3.3 How to read and interpret Candlestick Formations
Long Versus Short Shadows
Upper shadows represent the session high
Lower shadows the session low
Short shadows indicate trading action confined near the open and close
Long shadows show that trade extended well past the open and close.
Long upper shadow and short lower shadow
Indicate that buyers dominated during the session, and bid prices higher.
However, sellers later forced prices down from their highs
Long lower shadows and short upper shadows
Indicate that sellers dominated during the session and drove prices
lower.
However, buyers later overpowered by the end of the session
and the strong close created a long lower shadow.
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3.3 How to read and interpret Candlestick Formations
Bullish / Bearish
Marubozo
Indecision
Reversal
Doji
Dragonfly Doji
Hammer
Gravestone Doji:
Inverted Hammer
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Candlestick pattern recognition : Bullish Reversal Patterns
Engulfing Pattern
Piercing Line
Three White Soldiers
Engulfing Pattern:
A reversal pattern that can be bearish or bullish, depending upon whether it appears at the
end of an uptrend (bearish engulfing pattern) or a downtrend (bullish engulfing pattern). The
first day is characterized by a small body, followed by a day whose body completely engulfs
the previous day's body
Piercing Line:
A bullish two day reversal pattern. The first day, in a downtrend, is a long black day. The next
day opens at a new low, then closes above the midpoint of the body of the first day.
Three White Soldiers:
A bullish reversal pattern consisting of three consecutive white bodiesEach should open
within the previous body and the close should be near the high of the day.
Candlestick pattern recognition : Bullish Reversal Patterns
Three Black Crows
at can be bearish or bullish, depending upon whether it appears at the
earish engulfing pattern) or a downtrend (bullish engulfing pattern). The
ized by a small body, followed by a day whose body completely engulfs
ody
versal pattern. The first day, in a downtrend, is a long black day. The next
low, then closes above the midpoint of the body of the first day.
Three Black Crows:
A bearish reversal pattern consisting of three consecutive black bodies where each
day opens within the body of the previous day and closes below the previous day
Dark Cloud Cover
A bearish reversal pattern that continues the uptrend with a long white body. The
next day opens at a new high then closes below the midpoint of the body of the
first day
Upside Gap Two Crows:
A three day bearish pattern that only happens in an uptrend. The first day is a long
white body followed by a gapped open with the small black body remaining gapped
above the first day. The third day is also a black day whose body is larger than the
second day and engulfs it. The close of the last day is still above the first long
white day.
Upside Tasuki Gap:
A continuation pattern with a long white body followed by another white body that
has gapped above the first one. The third day is black and opens within the body
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of the second day, then closes in the gap between the first two days, but does not
close the gap.
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Shooting Star:
A single day pattern that can appear in an uptrend. It opens higher, trades much higher, then closes near
its open. It looks just like the Inverted Hammer except that it is bearish.
Evening Doji Star:
A three day bearish reversal pattern similar to the Evening Star. The uptrend continues with a large white
body. The next day opens higher, trades in a small range, then closes at its open (Doji). The next day
closes below the midpoint of the body of the first day.
Evening Star:
A bearish reversal pattern that continues an uptrend with a long white body day followed by a gapped up
small body day, then a black candle closing below the midpoint of the first day.
Morning Doji Star:
A three day bullish reversal pattern that is very similar to the Morning Star. The first day is in a downtrend
with a long black body. The next day opens lower with a Doji that has a small trading range. The last day
closes above the midpoint of the first day.
Morning Star:
A three day bullish reversal pattern consisting of three candlesticks - a long-bodied black candle extending
the current downtrend, a short middle candle that gapped down on the open, and a long-bodied white
candle that gapped up on the open and closed above the midpoint of the body of the first day.
Abandoned Baby
Reversal pattern with a gap up/down Doji followed by followed by another gap in the opposite direction. The
shadows on the Doji must completely gap below or above the shadows of the first and third day.
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Hammer:
Hammer candlesticks form when a security moves significantly lower after the
open, but rallies to close well above the intraday low. If this candlestick forms
during an advance, then it is called a Hanging Man.
Hanging Man:
Hanging Man candlesticks form when a security moves significantly lower after
the open, but rallies to close well above the intraday low. If this candlestick forms
during a decline, then it is called a Hammer.
Inverted Hammer:
A one day bullish reversal pattern. In a downtrend, the open is lower, then it
trades higher, but closes near its open, therefore looking like an inverted hammer
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Harami:
A two day pattern that has a small body day completely contained within the
range of the previous body, and is the opposite color.
Harami Cross:
A two day pattern similar to the Harami. The difference is that the last day is a
Doji.
Rising Three Methods:
A bullish continuation pattern in which a long white body is followed by three
small body days, each fully contained within the range of the high and low of
the first day. The fifth day closes at a new high.
Falling Three Methods:
A bearish continuation pattern. A long black body is followed by three small
body days, each fully contained within the range of the high and low of the
first day. The fifth day closes at a new low.
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Merging Candlesticks
Candlestick patterns can be made up of adding one or more days to form a
merged candle.
This blended candlestick is formed using the following method
The open of first candlestick
The close of the last candlestick
The high and low of the pattern
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3.5 Candlesticks Support & Resistance
Single candlesticks and candlestick patterns can be used to confirm or mark
support levels.
Such a support level could be new after an extended decline or confirm
a previous support level within a trading range.
In a trading range, candlesticks can help choose entry points for buying
near support and selling near resistance
Single candlesticks and candlestick patterns can be used to confirm or mark
resistance levels.
Such a resistance level could be new after an extended advance, or an
existing resistance level confirmed within a trading range.
In a trading range, candlesticks can help identify entry points to sell near
resistance or buy near support
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3.8 Limitations of candle stick charts
Candlesticks do not reflect the sequence of events between the open and
close
The high and the low are obvious and indisputable, but candlesticks (and
bar charts) cannot tell us which came first.
Example
The first sequence shows two small moves and one large move: a small
decline off the open to form the low, a sharp advance to form the high, and
a small decline to form the close.
The second sequence shows three rather sharp moves: a sharp advance
off the open to form the high, a sharp decline to form the low, and a sharp
advance to form the close.
The first sequence portrays strong, sustained buying pressure, and would
be considered more bullish.
The second sequence reflects more volatility and some selling pressure. 20
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Technical Analysis Training Course Syllabus
Tools & Techniques
Importance & Applications
Introduction to Stock Market
Technical Analysis
Price Trend, Support, Resistance, Price Channel, Retracement, Breakout etc.
Chart reading & interpretation
Importance of Price & Volume
Pivot Point levels
Basics of Dow Theory, Elliot Wave Theory
Golden Rules for disciplined Traders & Investors
Price Trend Analysis
Characteristics of uptrend, downtrend, consolidation
Find out Support , Resistance, Price Channel, Breakouts
Moving Averages
Buy & Sell signals, Support & Resistance levels, Trend direction
Retracement levels using Fibonacci
no. technique
Price correction, retracement levels, trend reversal levels
Buy & Sell opportunities
Chart Patterns
Bullish & Bearish Pattern breakouts
Trend reversal & continuation patterns
Buy/Sell opportunities through Price breakouts
Candlesticks charts
Introduction to Bull/Bear candlestick formations
Visually analyze battle between Bull Vs Bear and find out the winner
Identify & enter into successful trade early?
Technical Indicators and Oscillators
Buy & Sell signals
Overbought and Oversold market scenarios
In-depth study of Market Health indicators
What you saw in presentation is just a theory!
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How to recognize the Candlesticks Formations
Where to find them?
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