Technical analysis includes
1) Market structure
2) Trends
3) Candlesticks pattern
4) Support and Resistance
5) Chart patterns
6) Price- volume relationship
7) Indicators
Candlestick
Patterns
HIGH HIGH
CLOSE OPEN
OPEN CLOSE
LOW LOW
Different Types
of Candlestick
1)Hammer
It is single candle reversal pattern spotted at end of trend.
It consists of small upper wick and lower wick is 2 to 3 times
more than its real body.
Colour of hammer does not matter position of formation is
important.
When hammer formed at end of downtrend/ uptrend it
shows change of trend.
Downtrend - Reversal (Support)
Uptrend – Price Fall (Resistance)
Hanging Man andShooting Star Pattern
Hammer at uptrend or resistance is hanging man it has potential
of stocks bearish reversal.
Inverted hammer at uptrend or resistance is called shooting
star.
After formation of Hanging man or shooting star bears are
active and stock mostly preferred for short selling on 15 min
timeframe when low of hanging man or shooting star is broke
Candles high point is used as stoploss for selling.
Hanging man pattern Shooting star pattern
2) Morobozo candles
Morobozo candlesticks consists of more than 95 % of real body
in these wicks are very small or absent and has tendency of
going up or down.
Bullish morobozo form when buyers are more active than
sellers and stock further go up if it is formed.
Bearish morobozo is sign of seller are more active and
stock can further go down, short selling can be done on 15
min time frame if it is formed on chart.
Bullish Morobozo candles Bearish Morobozo candles
3) Engulfing Candle Pattern
1) Bullish engulfing candle
2) Bearish engulfing candle
1) Bullish engulfing candle
Bullish engulfing is formed when stock is in down trend and
base formed in stock there is possibility of reversal in stock.
Engulfing candle engulfs body of previous candle and have
potential upside & it is favorite candle of btst and option trader.
Stoploss is low of previous candle.
Bullish engulfing candle Bearish engulfing candle
2) Bearish engulfing candle
Bearish engulfing is formed when stock is in uptrend trend.
After bearish engulfing formation in stock there is possibility of
bearish reversal in stock, and it engulfs. body of previous candle
having potential downside.
Short selling can be done on second candle after formation of
bearish engulfing with stoploss of bearish candle high.
Piercing candle
Stock gives a gap down and closes at
least 50%
into the body of
the previous candlestick.
Piercing candle
It is two candle pattern shows bullish trend reversal in stock.
1 st candle is red(bearish) and 2nd candle is
green(bullish) .
Green candle opens below red candle and closes
slightly below red candle, this covers more than
50 % body of previous candle.
If piercing candle formed during downtrend, it is
more effective.
Dark Cloud Cover
Stock gives a gapup and closes at
least 50%
into the body of
the previous candlestick.
Dark Cloud Cover
If piercing candle formed in uptrend stock it is called dark cloud
cover.
It shows bearish trend reversal in stock with 1 st candle green
and 2 nd candle red in uptrend stock cover more than 50 %
body of previous candle.
selling can be done on dark cloud cover when low of green
previous candle is broke and high point is used for stoploss
for selling.
5) Harami candle
In Japanese Harami means pregnant and this indicates trend
reversal
Bullish harami and bearish harami are two types
of harami candle.
Bullish Harami/ Inside body candle
First candle should be big red candle and
second should be smaller green candle inside body.
Bullish harami pattern can be trend reversal or trend continuation.
After formation of bullish harami enter on second candle and
stoploss is lowest low of first red candle.
Bullish Harami Bearish Harami
Bearish Harami
It is two candle patterns.
First candle should be big green candle and second should be
smaller red candle inside it.
Bearish harami pattern suggest trend reversal and
has potential of price may fall.
After formation of bearish harami candle short selling can be
done on second candle with stoploss of first candle high.
Doji
6) Doji
Doji is formed when bullish traders push price up while bearish
traders reject price and push it back down.
Doji is trap candle it shows buyers and sellers are equal.
In simple doji candle opening and closing Price is same, it
indicates price neutrality and indecision.
Long legged doji is same to neutral doji except it has longer
wicks than it and formed in both uptrends and downtrends.
Gravestone doji is significant reversal pattern mainly occurs
in uptrend and shows more selling pressure in stock and
price goes down.
The long upper shadow suggests the direction of trend
maybe near turning point.
Dragonfly doji is bullish reversal pattern occurs at bottom after
downtrend.
The long lower shadow indicates more buying pressure than
selling pressure.
If any type of doji formed in stock wait for next candle to trade
and buying and selling decision depend on closing of next
day candle.
Morning Star/Morning doji star Pattern
Morning Star Pattern
Morning star is bullish trend reversal pattern having 3 candle.
First candle is bearish(red), second candle can
be any color and third candle is bullish (green).
It is formed during downtrend and shows potential
upward of stock if it is backed with strong volume.
When second candle body is doji it is called as
morning doji star.
entry should be on 4 th candle with 2 nd candle sl low.
Evening star/Evening doji star pattern
Evening star is bearish trend reversal pattern having 3 candle.
First candle is bullish (green), second candle can be any
colour and third candle is bearish (red).
If It is formed during uptrend show potential downward
moment of stock, if it is backed with strong volume.
When second candle body is doji it is called as evening doji
star.
entry should be on 4 th candle with 2 nd candle sl low.
Tweezer candlesticks
Bullish tweezer candlesticks Bearish Tweezer Candlesticks
(tweezer bottom) (tweezer top)
Bullish tweezer candlesticks (tweezer bottom)
It mostly occurs during downtrend near support and
it simply shows possibility of trend reversal.
Tweezer bottom occurs when two candles, back-to-back occurs
with similar low at support shows upside potential.
Bearish Tweezer Candlesticks (tweezer top)
It mostly occurs during uptrend near resistance and
it simply shows possibility of trend reversal.
Tweezer top occurs when two candles,back-to-back occurs with
similar high shows downside potential.
Spinning candle
Spinning candle is single candlestick in which body is small
(20-30 % body) and wick is long.
Colour of candle does not matter.
Candle shows indecision price can move any direction ,buyers
and sellers does not have control on price movement
Most of cases if spinning candle in upward direction (spinning
top) shows downside momentum.
if it is formed at support (spinning bottom) it has upside
momentum or trend continuation.
Spinning candle
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