CandleSticks Diagram

Vol.
PRICE & TIME

Trade with (health of the Stock)
<CHARTS> VOLUME
CANDLESTICKS
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CANDLESTICKS
Indicators/Oscillators
(Diagnosis)
TECHNICAL Analysis
From the desk of
Trading Friend venKEY
Trend Advisor …………………….
Hyderabad-AP
INDIA Dynamic Subject Logical Thinking towards Price Action
forex2tradeindia
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venKEY Email : - [email protected] 1
Vol. 4 Technical Analysis - CANDLESTICS This should be
100% - Your Success
Your EQUITY
1 DOJI – in style
- Doji-4 price/Longleg
67% -
- Dragon Fly Doji
- Gravestone Doji
2 Others (types)
50% - - Spinning Tops

Fibonacci Levels
CANDLESTICKS
- Maruboji (2)
- Hammer (2)
Trade
- Hanging Man
38% -
Watch - Shooting Star
Confirm - Engulfing (2)
- Harami (2)
0- - Dark Cloud Cover
- Tweezers (2)
- Windows
3 DOJI – in chart
- Morning Star
CANDLESTIC PATTERNS - Evening Star
can give you invaluable insight into price action at a glance. While the - Tri-star
basic candlestick patterns can tell you what the market is thinking,
they often generate false signals because they are so common.
venKEY
2
CANDLISTICK Patterns
Candlestick Basics :
Candlestick charts are an effective way of visualizing price movements.
Candlesticks can be used for any time frame,
(whether it be one day, one hour, 30-minutes - whatever you want)
Candlesticks are used to describe price action during given time frame.
Bullish Candle: When the close is higher than the open (usually green or white)
Bearish Candle: When the close is lower than the open (usually red or black)
CANDLESTICKS
Candlestick Parts (3)

Upper Shadow: The vertical line between the high of the day and the close
(bullish candle) or open (bearish candle)
Real Body : The difference between the open and close; colored portion of
the candlestick
Lower Shadow: The vertical line between the low of the day and the open
(bullish candle) or close (bearish candle)
Candlestick Patterns :
The power of Candlestick Charts is with multiple candlesticks forming reversal and
continuation patterns.
Bearish 3 Evening Doji Star On Neck-Line

Bearish Harami Evening Star Piercing Line
The Japanese have been using candlestick
Bearish Harami Cross Falling Window Rising Window charts since the 17th century to
Big Black Candle Gravestone Doji Separating Lines
Big White Candle Hammer Shaven Bottom analyze rice prices.
Black Body Hanging Man Shaven Head
Bullish 3 Inverted Black Shooting Star
Bullish Harami
Bullish Harami Cross
Hammer
Inverted Hammer
Spinning Top
Three Black Crows
Candlesticks were introduced into
Dark Cloud Cover Long Legged Doji Three White modern technical analysis by Steve Nison
Doji Long Lower Shadow Soldiers
Doji Star Long Upper Shadow Tweezer Bottoms in his book Japanese Candlestick Charting
Engulfing Bearish Line Morning Doji Star Tweezer Tops
Techniques.
venKEY Engulfing Bullish Line Morning Star White Body
3
CANDLESTICK (Quick View- 1)
No. of Name Type Look Like No. of Name Type Look Like
Bars Bars
1 - Doji Neutral 1 Hammer Reversal
Signal
BAR -Long leg In trend BAR
-4price doji reversal Hanging Man
1 Dragon Fly Trend 1 Inverted Bearish

Reversal Reversal
BAR BAR Hammer
CANDLESTICKS
Shooting Star
1 Grave Trend Spinning

1 or 2 Probable
Reversal Reverse
BAR Stone doji BAR TOPS
1 Marubozu Trend 2 Windows Probable

Reversal Down
BAR BAR Trend
S (Gaps)
2 Bullish Trend 2 Bearish Trend

Reversal Reversal
Bars Engulfing Bars Engulfing
venKEY http://en.wikipedia.org/wiki/Candlestick_pattern, http://www.onlinetradingconcepts.com/ 4

CANDLESTIC (Quick View- 2)
No. of Name Type Look Like No. of Name Type Look Like
Bars Bars
2 Reversal 2 Piercing Reversal

Bearish
Bars Harami Bars Line
2 Reversal 2 Dark Trend

Bullish Reversal
Bars Harami Bars Cloud
CANDLESTICKS
Cover
2 Probable More Morning Trend

Bearish Reversal Reversal
Bars Harami Bars STAR
Cross
2 Bullish Probable More Evening

Reversal
Bars Harami Bars STAR
Cross
2 Probable More Tri- Trend

Twin Reverse Reversal
Bars TOWERS Bars STAR
(Tweezers) Star
venKEY http://en.wikipedia.org/wiki/Candlestick_pattern, http://www.daytradersbulletin.com/html/cs1.html www.forex2tradeindia.weebly.com 5
DOJI & other Styles Market closes back
Indecision where the day started.
(1) 4-price Doji (-) • A Doji is quite often found at
(2) Doji (+) the bottom and top of
(3) Long legged Doji trends and thus is
Signifies Indecision between considered as a sign of
possible reversal of price
Bulls & Bears. direction,
These (3) candle formats : • Doji can be viewed as a

are more helpful in deciding
CANDLESTICKS
continuation pattern as
trend / trend reversals well (some times)
1) Doji is formed only when opening price & closing price are equal.
2) Long-legged Doji, (Rickshaw Man) except the upper & lower shadows are much longer than Doji.
3) 4-Price Doji is formed when the OHLC (Open, High, Low, Close) are equal.
Doji represents indecision. After the open, bulls push prices higher only for prices to be rejected and
pushed lower by the bears.
However, bears are unable to keep prices lower, and bulls then push prices back to the opening price.
venKEY 6
The Dragonfly Doji is created when the open, high,
Dragon FLY Doji Bullish and close are the same or about the same price
(Where the open, high, and close are exactly the same
price is quite rare). The most important part of the
Dragonfly Doji Dragonfly Doji is the long lower shadow.
Significant bullish
The long lower shadow implies that the market tested
reversal candlestick to find where demand was located and found it. Bears
pattern were able to press prices downward, but an area of
support was found at the low of the day and buying
pressure was able to push prices back up to the
Mainly occurs at the

opening price. Thus, the bearish advance downward
bottom of
CANDLESTICKS
was entirely rejected by the bulls.

downtrends.
In the chart, the market began the day testing to find
where demand would enter the market. The Stock
eventually found support at the low of the day, so
much support and subsequent buying pressure, that
prices were able to close the day approximately
where they started the day.
The Dragonfly Doji is an extremely helpful

Candlestick pattern to help traders visually see where
support and demand is located. After a downtrend,
the Dragonfly Doji can signal to traders that the
downtrend could be over and that short positions
should probably be covered. Other indicators should
be used in conjunction with the Dragonfly Doji
Note: The reverse of the Dragon Fly is
pattern to determine buy signals, for example, a break
venKEY Gravestone Doji (see: Gravestone Doji). of a downward trendline. 7
Grave STONE Doji The Gravestone Doji is created when the open, low,
and close are the same or about the same price
Bearish (Where the open, low, and close are exactly the same
price is quite rare). The most important part of the
Gravestone Doji : Graveston Doji is the long upper shadow.
significant bearish
The long upper shadow is generally interpreted by
reversal technicians as meaning that the market is testing
candlestick to find where supply and potential resistance is
pattern. located.
• The construction of the Gravestone Doji pattern occurs
when bulls are able to press prices upward.

Mainly occurs at the • However, an area of resistance is found at the high of the
CANDLESTICKS
day and selling pressure is able to push prices back down

top of uptrends. to the opening price.
• Therefore, the bullish advance upward was entirely
rejected by the bears.
The Gravestone Doji is an extremely helpful

Candlestick reversal pattern to help traders visually
see where resistance and supply is likely located.
After an uptrend, the Gravestone Doji can signal to

traders that the uptrend could be over and that long
positions should probably be exited. But other
indicators should be used in conjunction with the
Gravestone Doji pattern to determine an actual sell
signal.
Note: The reverse of the Gravestone is

A potential trigger could be a break of the upward
venKEY Dragon Fly Doji (see: DragonFly Doji). trendline support. 8
Spinning TOPS Indecision Spinning Tops or (koma) is a candlestick which the body
of the candlestick is smaller than the lower and upper wicks.
IT represents a neutral position in which neither the bulls or bears are

able to gain control during the trading session.
Color of the real body is irrelevant as (body of the candle is so small)
If a spinning top arises after a strong uptrend or downtrend, it is an

early sign that the trend could be reversing.
Traders should wait for more confirmation that the trend is changing
CANDLESTICKS
prior to taking a short or long position.
MARUBOZU :when recognized, is a good example of a strong

MARUBOZU Reversal buying ( in case of a bullish Marubozu) or selling ( in case of a
bearish Marubozu) pressure.
If we spot on our chart a bullish Marubozu candle for example, we can quickly
come to the conclusion that for that time period (represented by the candle) the
buyers have controlled the price action from the first trade to the last trade.
You can clearly see that a Marubozu candle has no shadows ( high and low price
levels outside the body). This means in the case of a bullish Marubozu – that the
seller could not push the buyers back from any new high price that was created in
that time period.
The opposite for a bearish Marubozu: the sellers had total control on
the price action, and the buyers could not push the market back up from
When we spot a Marubozu candle, we would want to any new low.
regard it with connection to how the market is trading
right now. If we are in the middle of a long bullish trend, As I mentioned before, the greater the time period of candles we are looking at,
and we spot a bearish Marubozu, this can be a sign for a
the more important the shapes of the candles is to us.
venKEY coming reversal in price. 9
Bullish ENGULFING
www.forex2tradeindia.weebly.com Reversal
The bearish candle real body of Day-1 is usually contained within the real body of the bullish
CANDLESTICKS
candle of Day 2.
On Day-2, the market gaps down; however, the bears do not get very far before bulls take
over and push prices higher, filling in the gap down from the morning's open and pushing prices
past the previous day's open.
The power of the Bullish Engulfing Pattern comes from the incredible change of
sentiment from a bearish gap down in the morning, to a large bullish real body
candle that closes at the highs of the day.
Bears have overstayed their welcome and bulls have taken control of the market.
Bullish Engulfing Pattern

A chart pattern that forms when a small black
candlestick is followed by a large white
candlestick that completely eclipses or
"engulfs" the previous day's candlestick.
The shadows or tails of the small candlestick

are short, which enables the body of the large
candlestick to cover the entire candlestick
from the previous day.
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venKEY
Bearish ENGULFING
Reversal
Generally, the bullish candle real body of Day 1 is contained within the real body of the bearish candle of Day 2.
Classical PATTERNS
The market gaps up (bullish sign) on Day 2; but, the bulls do not push very far higher before bears take over and push prices further down, not only filling
in the gap down from the morning's open but also pushing prices below the previous day's open.
With the Bullish Engulfing Pattern, there is an incredible change of sentiment from the bullish gap up at the open, to the large bearish
real body candle that closed at the lows of the day.
Bears have successfully overtaken bulls for the day and possibly for the next few periods.
Bearish Engulfing Pattern

A chart pattern that consists
of a small white candlestick with Reversal
short shadows or tails followed
by a large black candlestick that
eclipses or "engulfs" the small white
one. Which is reversal pattern
A bearish harami may be formed from a combination of a large white or black candlestick and a smaller white or black
candlestick. The smaller the second candlestick, the more likely the reversal. It is thought to be a strong sign that a trend is
venKEY ending when a large white candle stick is followed by a small black candlestick.
11
Bullish HARAMI cross Definition:
Bullish Harami Cross Pattern is a doji preceded by a long black
real body. The Bullish Harami Cross Pattern is a major bullish
reversal pattern. It is more significant than a regular Bullish
Harami Pattern.
Recognition Criteria:
1. Market is characterized by downtrend.
2. Then we see a long black candlestick.
3. Long black candlestick is followed by a doji completely
engulfed by the real body of the first day. The shadows
(high/low) of the doji may not be necessarily contained within
the first black body, though it's preferable if they are.

CANDLESTICKS
Explanation:
The Bullish Harami Cross Pattern is a strong signal of disparity
about the market’s health. During a downtrend, the heavy selling
BULLSIH HARAMI CROSS reflected by a long, black real body; is followed by a doji next day.
Type : Reversal This shows that the market is starting to severe itself from the
prior downtrend.
Relevance: : BULLISH
Prior Trend: : BEARISH Important Factors:
Reliability: ; Medium The Bullish Harami Pattern is not a major reversal pattern,
Confirmation:Recommended however the Bullish Harami Cross Pattern is a major upside
No. of Sticks : 2 reversal pattern. Short traders will not be wise to ignore the
significance of a harami cross just after a long black candlestick.
Harami crosses point out to the bottoms.
Harami Cross
A trend indicated by a large candlestick A third day confirmation of the reversal is recommended (though
followed by a doji that is located within the not required) to judge that the downtrend has reversed. The
top and bottom of the candlestick's body. This confirmation may be in the form of a white candlestick, a large
indicates that the previous trend is about to gap up or a higher close on the next trading day.
reverse.
venKEY http://www.candlesticker.com/Cs43.asp 12
Definition:
Bearish HARAMI cross Bearish Harami Cross Pattern is a doji preceded by a long white
real body. The Bearish Harami Cross Pattern is a major reversal
pattern and is more significant than a regular Bearish Harami Pattern.
Recognition Criteria:
1. Market is characterized by uptrend.
2. We see a long white candlestick in the first day.
3. Then we see a doji completely engulfed by the real body of the
first day on the second day. The shadows (high/low) of this Doji do
not have to be contained within the first, though it's preferable if
they are.
Explanation:
CANDLESTICKS
The Bearish Harami Cross Pattern is a sign of disparity about the

market’s health. Market is bullish and strong buying continues as
evidenced by the long, white real body but then we see the doji. This
shows that the market may not continue in uptrend.
BEARISH HARAMI CROSS
Type : Reversal Important Factors:
Relevance: : Bearish While the Bearish Harami Pattern is not a major reversal pattern, the
Bearish Harami Cross Pattern is a major downside reversal pattern. If
Prior Trend: : Bullish a harami cross appears after a long white candlestick, longs should take
Reliability: ; Medium notice of it since Harami Crosses call tops very effectively.
Confirmation:Recommended
No. of Sticks : 2 A confirmation on the third day is required to be sure that the
uptrend has reversed.
Harami Cross This confirmation may be in the form of a black candlestick, a large gap
A trend indicated by a large candlestick down or a lower close on the third day.
followed by a doji that is located within the top
and bottom of the candlestick's body. This A Harami cross can be either bullish or bearish, depending on the
indicates that the previous trend is about to previous trend. The appearance of a Harami Cross, rather than a
reverse. smaller body, increases the likelihood that the trend will reverse.
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DARK CLOUD COVER Dark Cloud Cover
Dark Cloud Cover is a bearish candlestick reversal
pattern, similar to the Bearish Engulfing Pattern
Bearish (see: Bearish Engulfing Pattern).
Components of a Dark Cloud Cover formation:
A Dark Bullish Candle (1st) & Bearish Candle (2nd)
Cloud
pattern
A Dark Cloud Cover Pattern occurs when a bearish candle
encountere
d after an on Day 2 closes below the middle of Day 1's candle.
up-trend is In addition, price gaps up on Day 2 only to fill the gap
a reversal (see: Gaps) and close significantly into the gains made by Day
signal, 1's bullish candlestick.

warning of
"rainy days"
CANDLESTICKS
The rejection of the gap up is a bearish sign in and of itself,

ahead.
but the retracement into the gains of the previous day's gains
adds even more bearish sentiment. Bulls are unable to hold
prices higher, demand is unable to keep up with the building
supply.
Dark Cloud Cover Sell Signal

Traders usually suggest not selling exactly when one
sees the Dark Cloud Cover Pattern (Day 1 & Day 2)
until other confirming signals are given such as a break
of an upward trendline or other technical indicators.
One reason for waiting for confirmation is that the
Dark Cloud Cover Pattern is a bearish pattern, but
not as bearish as it could be: part of the gains from
Day 1 have still been preserved.
A more bearish reversal pattern is the Bearish Engulfing Pattern (see: Bearish Engulfing Pattern) that completely rejects the
gains of Day 1 and usually closes below the lows of Day 1.
Note :the bullish equivalent of the Dark Cloud Cover Pattern is the Piercing Pattern (see: Piercing Pattern).
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PIERCING Line Bullish Piercing Line Pattern
A Bullish candlestick reversal pattern, similar to
The
the Bullish Engulfing Pattern (see: Bullish Engulfing
Piercing Pattern). Compents of a Piercing Pattern :
Line is the
opposite of
Bearish Candle (1st) & Bullish Candle (2nd)
the Dark
Cloud A Piercing Pattern occurs when a bullish candle on Day 2 closes above
pattern and the middle of Day 1's bearish candle.
is a reversal Moreover, price gaps down on Day 2 only for the gap to be filled
signal if it (see: Gaps) and closes significantly into the losses made previously in
appears Day 1's bearish candlestick.
after a The rejection of the gap up by the bulls is a major bullish sign, and the
down- fact that bulls were able to press further up into the losses of the
CANDLESTICKS
trend. previous day adds even more bullish sentiment. Bulls were successful in
holding prices higher, absorbing excess supply and increasing the level
of demand.
Piercing Pattern Candlestick Buy Signal

Generally other technical indicators are used to confirm
a buy signal given by the Piercing Pattern (i.e. downward
trendline break). Since the Piercing Pattern means that
bulls were unable to completely reverse the losses of
Day 1, more bullish movement should be expected
before an outright buy signal is given. Also, more volume
than usual on the bullish advance on Day 2 is a stronger
indicator that bulls have taken charge and that the prior
downtrend is likely ending.
A more bullish reversal pattern is the Bullish Engulfing Pattern (see: Bullish Engulfing Pattern) that completely
reverses the losses of Day 1 and adds new gains.
For further study, the bearish equivalent of the Piercing Pattern is the Dark Cloud Cover Pattern
venKEY 15
Hanging Man Hanging Man - The Hanging Man candlestick formation, as one could
predict from the name, is a bearish sign. This pattern occurs mainly at the
top of uptrends and is a warning of a potential reversal downward. It is
important to emphasize that the Hanging Man pattern is a warning of
A hammer t potential price change, not a signal, in and of itself, to go short.
hat occurs
after an up
trend is The Hanging Man formation, just like theHammer, is created when the
called a open, high, and close are roughly the same price. Also, there is a long
'hanging
man' and is lower shadow, which should be at least twice the length of the real body.
a bearish When the high and the open are the same, a bearish Hanging Man
signal. candlestick is formed and it is considered a stronger bearish sign than
when the high and close are the same, forming a bullish Hanging Man (the
bullish Hanging Man is still bearish, just less so because the day closed
with gains).
CANDLESTICKS
Confirmation that the uptrend was in trouble occured when

Alcoa gapped down the next day and continued downward After a long uptrend, the formation of a Hanging Man is bearish because
creating a large bearish red candle. To some traders, this
confirmation candle, plus the fact that the upward trendline
prices hesitated by dropping significantly during the day. Granted, buyers
support was broken, gave the signal to go short. came back into the stock, future, or currency and pushed price back near
It is important to repeat, that the Hanging Man formation is not the open, but the fact that prices were able to fall significantly shows that
the sign to go short; other indicators such as a trendline break or
confirmation candle should be used to generate sell signals.
bears are testing the resolve of the bulls. What happens on the next day
The bullish version of the Hanging Man is the Hammer formation after the Hanging Man pattern is what gives traders an idea as to
(see: Hammer) that occurs after downtrends. whether or not prices will go higher or lower.
venKEY 16
Tweezer Tops and Bottoms
TWEEZERS The Tweezer Top formation is a bearish reversal pattern seen at
Twin Towers the top of uptrends and the Tweezer Bottom formation is a
bullish reversal pattern seen at the bottom of downtrends.
Reversal Tweezer Top formation consists of two candlesticks:
Bullish Candle (Day 1) Bearish Candle (Day 2)
Tweezer Bottom formation consists of two candlesticks:

Bearish Candle (Day 1) Bullish Candle (Day 2)
Sometimes Tweezer Tops or Bottoms have three candlesticks.

A bearish Tweezer Top occurs during an uptrend when bulls take

prices higher, often closing the day off near the highs (a bullish sign).
CANDLESTICKS
However, on the second day, how traders feel (i.e. their sentiment)
reverses completely. The market opens and goes straight down, often
eliminating the entire gains of Day 1.
The reverse, a bullish Tweezer Bottomoccurs during a downtrend

when bears continue to take prices lower, usually closing the day near
the lows (a bearish sign).
Nevertheless, Day 2 is completely opposite because prices open and

go nowhere but upwards. This bullish advance on Day 2 sometimes
eliminates all losses from the previous day.
Tweezer BOTTOM
(intra-day)
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Morning STAR 1.Morning Star :
Bullish A bullish candlestick pattern that consists of three candles
that have demonstrated the following characteristics:
1. The first bar is a large red candlestick located within a

defined downtrend.
2. The second bar is a small-bodied candle (either red or
white) that closes below the first red bar.
3. The last bar is a large white candle that opens above the
middle candle and closes near the center of the first
bar's body.
As shown by the chart, this pattern is used by traders as an

early indication that the downtrend is about to reverse.

CANDLESTICKS
Morning Star pattern - can be useful in determining trend changes, Particularly when used in conjunction with other
technical indicators. Many traders also use price oscillators such as the MACD and RSI to confirm the reversal.
Day 1 of the Morning Star pattern for the Midcap 400 (MDY)
chart above was a strong bearish red candle. Day 2 continued
Day 1's bearish sentiment by gapping down.
Day 2 was a Doji, which is a candlestick signifying indecision.

Bears were unable to continue the large decreases of the
previous day; they were only able to close slightly lower than the
open.
Day 3 began with a bullish gap up. The bulls then took hold of
the Midcap 400 exchange traded fund for the entire day. Also,
Day 3 broke above the downward trendline that had served
asresistance for MDY for the past week and a half. Both the
trendline break and the classic Morning Star pattern gave traders
a signal to go long and buy the Midcap 400 exchange traded fund.
The Morning Star pattern is a very powerful three

candlestick bullish reversal pattern. The bearish
equivalent of the Morning Star is the Evening Star
18
venKEY pattern (see: Evening Star).
Evening Star:
Evening STAR A bearish candlestick pattern consisting of three candles that
Bearish have demonstrated the following characteristics:
1. The first bar is a large white candlestick located within

an uptrend.
2. The middle bar is a small-bodied candle (red or white)
that closes above the first white bar.
3. The last bar is a large red candle that opens below the
middle candle and closes near the center of the first
bar's body.
As shown by the chart below, this pattern is used by traders

as an early indication that the uptrend is about to reverse.

CANDLESTICKS
Day 1 of the Evening Star pattern for Exxon-Mobil (XOM) stock above
was a strong bullish candle, in fact it was so strong that the close was the
same as the high (very bullish sign).
Day 2 continued Day 1's bullish sentiment by gapping up. However, Day 2
was a Doji, which is a candlestick signifying indecision. Bulls were unable
to continue the large rally of the previous day; they were only able to
close slightly higher than the open.
Day 3 began with a bearish gap down. In fact, bears took hold of Exxon-
Mobil stock the entire day, the open was the same as the high and the
close was the same as the low (a sign of very bearish sentiment). Also,
Day 3 powerfully broke below the upward trendline that had served as
support for XOM for the past week. Both the trendline break and the
classic Evening Star pattern gave traders a signal to sell short ……>
The Evening Star pattern is a very powerful three candlestick

bearish reversal pattern. The bullish equivalent of the Evening
Star is the Morning Star pattern (see: Morning Star).
Evening Star formations can be useful in determining trend changes, particularly when used in conjunction with
other indicators. Many traders use price oscillators and trendlines to confirm this candlestick pattern
venKEY 19
TRI Star Tri-Star - A type of candlestick pattern that signals a reversal in the
current trend. This pattern is formed when three consecutive doji
candlesticks appear at the end of a prolonged trend.
The chart below illustrates a bearish tri-star pattern at the top of the
uptrend and is used to mark the beginning of a shift in momentum.
Tri-Star - A single Doji candlestick is an infrequent occurrence

that is used by traders to suggest market indecision. Having a
series of three consecutive doji candles is extremely rare, but
when it is discovered, the severe market
indecision generally leads to a sharp reversal of the given trend.
The "three stars" pattern can also be used to signal the reversal
of downward momentum when the pattern is formed at the end
CANDLESTICKS
of a prolonged downtrend.
NEW
PATTERN
20
venKEY
Hook Reversal Pattern
Hook reversals are
short- to medium-
term reversal
patterns. They are
identified by a higher
low and a lower high
compared to the
CANDLESTICKS
Bullish previous day. Bearish
Entry: Confirming the reversal pattern - Exit:

If the pattern occurs after an uptrend, then the Defining the target and stop -
open must be near the prior high, and the low In most cases, you will see a sharp
must be near the prior low. reversal (as seen in Figs. 3 and 4)
when using this pattern. If the
If the pattern occurs after a downtrend, then the next candle shows a strong
opposite is true. As with the island reversal continuation of the prior trend,
pattern, we are also looking for high volume on then the reversal pattern is
this second candle. Finally, the stronger the prior invalidated, and you should exit
trend, the more reliable the reversal pattern. quickly, but prudently.
venKEY 21
Kickers Bullish Kicker patterns are some of the strongest, most reliable
candlestick patterns. They are characterized by a very
sharp reversal in price during the span of two candlesticks.
Entry: Confirming the reversal pattern -
This kind of price action tells you that one group of traders has overpowered the
other (often as a result of a fundamental change in the company), and a new trend is
being established.
Ideally, you should look for a gap between the first and second candles, along with
high volume.
Exit: Defining a target and stop -

When using this pattern, you will see an immediate reversal, which should result in
CANDLESTICKS
an overall trend change.

If the trend instead moves sideways or against the reversal direction, then you
should exit quickly, but prudently.
Candles
Appear
On
CHART
venKEY 22
San-Ku (Three Gaps) Patterns Bearish
San-Ku (Three Gaps) Entry: Confirming the reversal pattern -
Patterns This pattern operates on the premise that prices are
are anticipatory trend reversal likely to retreat after sharp moves because traders
indicators. In other words, they do
are likely to start booking profits. Therefore, this
not indicate an exact point of
reversal; rather, they indicate that pattern is best used with ther exhaustion indicators.
So, look for extremes being reached in indicators
a reversal is likely to occur in the

near future. They are identified by such as the RSI (relative strength
CANDLESTICKS
three gaps within a strong trend. index), MACD (moving average convergence
divergence) crossovers, and other such indicators. It
is also useful to look for volume patterns that
suggest exhaustion.
Exit: Defining the target and stop -

In most cases, when using this pattern, you will see a
price reversal shortly after the third gap takes place
(as seen in Fig. 5). However, if there are
any breakouts on high volume after the last gap, then
the pattern is invalidated, and you should exit quickly,
but prudently.
venKEY 23
BULLISH
Candlestick
Patterns
BEARISH
Candlestick
Patterns
CANDLESTICKS
Clickers
Trend
REVERSALS
venKEY 24
Munehisa Honma -1755 - One of Sakata’s method baselines is that if
SAKATA 5-method you feel you could benefit from a certain formation, wait 3 days and if it still
looks promising, enter the trade and you can most likely make profits.
Sakata’s method has its own set of candlestick patterns and they have been developed based on Honma’s 160 rules. The number 3 is important in case of his patterns
Three Mountains - Triple TOPS Three soldiers/black crows

Previously, when talking I’d say it’s similar to the
about other type three gaps – three soldiers who
of charts and such I have are all going in the same direction,
mentioned the three top except that no gaps are required.
formations etc. This three Note that this is not a reversal
mountains looks similar. but rather a CONTINUATION
pattern.
Three rivers /Three Triple BOTTOMS

BAR REVERSAL
Sisters– Three Methods

Opposite to the three - Raising 3 method
mountains formation. This is
basically a three bottom - falling 3 method
formation. 3 –days This looks similar to the rising
Note that in case of Sakata’s three of falling three method
method there’s not just 1-5 3-methods discussed in my other post. The
candlesticks that we are market makes a pause within this
looking at anymore but pattern and starts to go in the
rather the whole chart direction of the trend again after
which may consist of the three methods is „over”.
multiple weeks, months or
years.
Three Buddhas - Head & Shoulder Three Gaps –

like head and shoulders
After the market has bottomed,
formation.
you can see three empty
candlesticks going up, there’s a gal
between all of them. Once the
third long candlestick is visible,
you can expect a reversal.
venKEY 25
http://www.learning-to-invest.com/
Bar REVERSAL
Bar-Reversal
When a particular bar/a group of bars combined
together and speaks for a change in a trend a bar-
reversal is said.
As because it the reversal phenomena it occurs either

after a prolong rise or after a prolong down-fall.

BAR REVERSALS
BAR REVERSAL
Reversal will not occur in the middle point of chart..

1. UPWARD KEY- reversal
BAR CHART PATTERNS can give you 2 DOWNWARD KEY – reversal
invaluable insight into price action at a 3 Perfect Upward Key-reversal
glance. While the basic candlestick patterns
can tell you what the market is thinking, 4 Perfect Downward Key-reversal
they often generate false signals because 5 Two day reversal
they are so common.
6 Island Reversal (bull/bear)
Here we introduce you to more advanced 7 Low Leaving Bar (LL bar)
BAR REVERSAL PATTERNS, with a higher 8 Formation of TAIL BAR
degree of reliability, as well as explore how
they can be combined with gaps to 9 5C reversal
produce profitable trading strategies. 10.3K bar (knocking Bar)
venKEY 26
Comes after a Bullish
Upward KEY-reversal prolong down trend Reversal
Symptoms:
The previous trend was down , market has been falling for a
considerable period of time. One day market open below of the
previous day and keep falling further. After some time price
starts recovery from the day low and moved within the body of
the previous day bar at least by 50% and manages to close near
the high of the day.
Trading method: Before taking long position – one should examine

the VOLUME of the said period.
BAR REVERSAL
Volume should be 2 times better than the average of last 5 bars. Compare with
Piercing Line
Comes after a Bearish

Downward KEY-reversal prolong up trend Reversal
Symptoms: Compare with

The previous trend was UP, market moves for a considerable DARKCLOUD
period of time and one day the market open up of the previous
day high and keep going up trend.
After a considerable time the price starts selling pressure with

or without volumes. (revers of the above)
Trading method: -Volume has no IMPORTANCE
venKEY 27
Perfect upward KEY-reversal Bullish
Reversal
In case of the perfect upwards key reversal volume tends
to greater than the upward key reversal. Some time it acts
as a bear market-bottom.
The previous trend was UP, market moves for a

considerable period of time and one day the market open
up of the previous day high and keep going up trend.
After a considerable time the price starts selling pressure
with or without volumes.
Trading method:
Before taking long position – one should examine the
BAR REVERSAL
Compare with
VOLUME of the said period. BULLISH ENGULFING
Volume has no IMPORTANCE
Bearish
Perfect downward KEY-reversal Reversal
Compare with
In case of the perfect DOWNwards key reversal volume BEARISH
tends to LESSER than the DOWN ward key reversal. ENGULFING
Some time it acts as a BULL market-Tops
The previous trend was UP, market moves for a

considerable period of time and one day the market open
up of the previous day high and keep going up trend.
After a considerable time the price starts selling pressure
with or without volumes. (reveres of the above)
Trading method: -Volume has no IMPORTANCE

venKEY 28
2-day Reversal
BULLISH BEARISH
BAR REVERSAL
Two day reversal bar occurs on a consecutive two-day bars Two day reversal bar occurs on a consecutive two-day bars
where the main of the bars is equal but nature is totally where the main of the bars is equal but nature is totally
different. different.
In case of the Bullish two day reversal which as closing In case of the Bullish two day reversal which as closing
above the opening on the 1st and closing above the opening below the opening on the 1st and closing above the opening
on the 2nd day. on the 2nd day.
In case of bullish two-day reversal the formation of the Volume has No criteria
second bar should supported by the greater volume
venKEY 29
ISLAND REVERSAL
BULLISH Island Reversal

Patterns
BEARISH
are strong short-term
trend reversal indicators.
They are identified by a
gap between a reversal
candlestick and two

candles on either side of
BAR REVERSAL
it.
Island reversals can also occur in

"clusters" - that is, in a multi-candle
reversal pattern, such as an engulfing,
as opposed to a single candle reversal.
Clusters are easier to spot, but they
often result in weaker reversals that
are not as sharp and take longer to
occur.
Entry: Confirming the reversal pattern - When looking for an island reversal, you are looking for indecision and a battle between
bulls and bears. This type of scenario is best characterized by a long-ended doji candle that has high volume occurring after a long prior
trend; it is important to look for these three elements to confirm any potential reversal pattern.
Exit: Defining the target and stop - In most cases, you will see a sharp reversal (as seen in Figs. 1 and 2) when using this pattern.
This reversal pattern does not necessarily indicate a medium- or long-term reversal, so it would be prudent to exit your position after
the swing move has been made. If the next candle ever fills the gap, then the reversal pattern is invalidated, and you should exit
venKEY prudently. 30
LL Bar (Low Leaving Bar)
Low leaving bar occurs after a
prolong down fall. After opening
of the market price fall in the
first session but manages to find
support in second session. And
manage to close at least 30% of
the above of day low. Buy signal
occurred while price

manages/crosses the high of the
BAR REVERSAL
low leaving bar.
Formation of TAIL BAR

The length of the said bar is greater than
the average of the last 11 bars.
If the Low leaving bar is occurred at the

top of the Chart then there is a High
Chance of BEARISH trend Reversal.
Reverse the same if it appears at the

bottome of the Chart. Then one could
expect a BULLISH rally from the Point.
venKEY 31
3 k (knocking) BAR
A single bar should close

below the low of the
previous three candles
It signifies the Bearish
BAR REVERSAL
5 C Reversal ( Closing Basis)

5C reversal (closing basis):
Rock Sold bottom…after strong
consolidations…market moves towards
high trending.
It has to close above the last 5 candle…

other-wise it is not a valid 5C reversal.
Trade with sl= 5 bars low= solid rock

means highly and no. of times tested it
support.
venKEY 32
Candlestick Patters All other Patterns
Major & Imp. Patterns High Profitable Patterns
Doji Signal Long-Legged Doji
Bullish Engulfing Bearish Engulfing S Cradle Pattern Series of Shadows at the Top
Hammer Hanging Man Dumpling Top Series of Doji at the Top
Piercing Pattern Dark Cloud Fry Pan Bottom Series of Doji at the Bottom
Bullish Harami Bearish Harami Jay-Hook Pattern Doji End of Flat Trading Range Top
Morning Star Evening Star coop Pattern Doji End of Flat Trading
CANDLESTICKS
Range Bottom
Kicker Signals Shooting Star Tweezer Bottom / TOP
Combination Bullish Signals at the
Double Bottom / Top
Inverted Hammer Bottom
Double Top
Combination Sell Signals at the Top
Secondary Patterns Trading Channels
Double Bullish Engulfing Pattern
The Tri Star Three Black Crows Gap Down Hammer at the Bottom
Double Bearish Engulfing Pattern
Three Identical Crows Two Crows Gap Up Inverted Hammer
Breakout Through Moving
Upside Gap Two Crows Meeting Lines Gap Down After a Doji at the Top Averages
Belt Hold The Breakaway Gap Down Doji at the Bottom Moving Averages Act as Price
Gap Down Bullish Engulfing Magnets
Deliberation Advance Block
Gap Down Bearish Harami Moving Average as Support
Ladder Bottom Homing Pigeon
Gap Down Shooting Star Moving Average as Resistance
Stick Sandwich Matching Low
Gap Down Hanging Man
Three Stars in the South Three White Soldiers
Multiple Tails to the Downside
Unique Three River Bottom
Three Inside Up & Three Inside Down
Concealing Baby Swallow
venKEY 33
Day Trading Strategies
1. BUY above> or SELL below<
PROFIT Deciding Factors
2. Day LOW and HIGH breakings 1. Breakouts
3. Previous day Closing 2. Support & Resistance
3. Retracement Levels
4. Volume (Value or Qty.) - Pivot Points
5. RSI (over bought/over sold) - Fibonacci

4. Trend Reversal
6. Moving Averages/ MACd crossover
5. Moving Averages & Cross over
7. Divergence (price vs. Indicators) 6. Anniversary Figures
8. Double Top/Bottoms 7. Rounded Figures
Theory
8. Holidays / Weekends
9. Spread strategies 9. Popular Patterns
10. Hedging - Head & Shoulder
- Triangles
11. Price Gaps Trading - Double Top/Bottoms
12. Choosing Options - Cup & Handle
- Rounding Top/Bottom
- Diamond Pattern
- Greatly Pattern
venKEY 34
Tgt. & Sl. fixation Other Affective Factors :
•Supply & Demand
Regular System: •Inventory
 Day Low or Day High •Bulk deals/profit booking/panic
 Yesterday Closing buying
•Economy Statistics(GDP/Inflation)
Technical Aspect •News Alerts (Intnl. Meets,

 Change of Open Interest Resolutions)
 Tech. Support & Resistance (Pivot-Day) •Corporate Results
 Tech. Support & Resistance (Fibonacci) •(Dividends, Orders, Returns)
Theory
 Pys. Support & Resistance ( Trend •Government Policies

Lines)
•(Imports/Exports/Taxes)
 Supports & Resistance ( Patterns)
•Rounded Figures /Historical Figures
 Moving Averages Crossover
•Historical Importance
 RSI-Over bought/sold conditions
•Seasons / weather
 Stochastics
•Holidays
 Divergence
•Political Issues/Strikes
 Last ‘n’ No. of Bars
•Geographical Issues/Earth quake
 Last (3) bars High/Lows
35
Candlestick Patters
Continuation Patterns More study about Candlestics
 Upside Tasuki Gap  http://www.scribd.com/doc/736
 Downside Tasuki Gap 9608/Mastering-Candlestick-
Charts-Part-I
 On Neck Line
In Neck Line
venKEYs2trade

 http://www.pristine.com/
 Thrusting
 Rising Three Method
 Falling Three Method
 Side-By-Side White Line
 Separating Lines
 Mat Hold
 Three-Line Strike
 Upside Gap three Method
http://www.candlestic
kforum.com/PPF/Para
meters/16_20_/candl
estick.asp
36
Doji Star Shooting Star
A Doji Star is With a Shooting Star, the
weaker than body on the second
the Morning or Eve candlestick must be near
the low -- at the bottom
ning Star: end of the trading range --
the doji represents and the
indecision. The doji upper shadow must be
star requires taller. This is also a
confirmation from weaker reversal signal
the next than
candlestick closing the Morning orEvening St
ar.
in the bottom half The pattern requires
of the body of the confirmation from the

first candlestick. next candlestick closing
below half-way on the
CANDLESTICKS
body of the first.
Rising 3 (method) Falling 3 (method)

The bearish
Falling Method
The Rising Method
consists of two
consists of two
strong long
white lines bracketi black lines brack
ng 3 or 4 small eting 3 or 4
declining black small ascending
candlesticks. The white
final white line candlesticks, the
forms a new second black line
closing high. The
forming a new
pattern is definitely
bullish. closing low.
While candlesticks may offer useful pointers as to short-term direction,

trading on the strength of candlestick signals alone is not advisable.
Evaluation Jack Schwager in Technical Analysis conducted fairly extensive tests with candlesticks
venKEY over a number of markets with disappointing results.
37
Harami Engulfing Patterns
A Harami
formation indicates
loss of momentum Engulfing
and often warns of patterns are
reversal after a where the body
strong trend. of the second
Harami means
candlestick
'pregnant' which is
quite descriptive. 'engulfs' the first.
The second They often
candlestick must follow or
be contained completedoji, ha
within the body of mmer or gravest

the first, though one patterns and
the shadows may signal reversal in
CANDLESTICKS
protrude slightly.
the short-term
trend.
Morning Star Reversal Evening Star Reversal

The Morning Star
pattern signals a The Evening Star
bullish reversal after a pattern is
down-trend. The first
candlestick has a long
opposite
black body. The to Morning
second candlestick Star and is a
gaps down from the reversal signal at
first (the bodies
display a gap, but the the end of an up-
shadows may still trend. The
overlap) and is more pattern is more
bullish if hollow. The
next candlestick has a
bearish if the
long white body second
which closes in the candlestick is
top half of the body filled rather than
of the first
candlestick. hollow.
venKEY 38
1 Chart Patterns
Theory
2 Price Movement
3 Volumes
4 RSI
5 MACd
6 Bollinger Bonds
Technical Analysis 7 Stochastics
For disciplined Trader who have 8 Dow Theory
PATIENCE - CONFIDENCE 9 Elliot Wave

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Vol.

PRICE & TIME

50% - - Spinning Tops

Candlestick Parts (3)

Bearish 3 Evening Doji Star On Neck-Line

1 Dragon Fly Trend 1 Inverted Bearish

1 Grave Trend Spinning

1 Marubozu Trend 2 Windows Probable

2 Bullish Trend 2 Bearish Trend

venKEY http://en.wikipedia.org/wiki/Candlestick_pattern, http://www.onlinetradingconcepts.com/ 4

2 Reversal 2 Piercing Reversal

2 Reversal 2 Dark Trend

2 Probable More Morning Trend

2 Bullish Probable More Evening

2 Probable More Tri- Trend

These (3) candle formats : • Doji can be viewed as a

Mainly occurs at the

was entirely rejected by the bulls.

The Dragonfly Doji is an extremely helpful

when bulls are able to press prices upward.

day and selling pressure is able to push prices back down

The Gravestone Doji is an extremely helpful

After an uptrend, the Gravestone Doji can signal to

Note: The reverse of the Gravestone is

IT represents a neutral position in which neither the bulls or bears are

Color of the real body is irrelevant as (body of the candle is so small)

If a spinning top arises after a strong uptrend or downtrend, it is an

prior to taking a short or long position.

MARUBOZU :when recognized, is a good example of a strong

Bullish Engulfing Pattern

The shadows or tails of the small candlestick

Bearish Engulfing Pattern

the first black body, though it's preferable if they are.

The Bearish Harami Cross Pattern is a sign of disparity about the

signal, 1's bullish candlestick.

The rejection of the gap up is a bearish sign in and of itself,

Dark Cloud Cover Sell Signal

Piercing Pattern Candlestick Buy Signal

Confirmation that the uptrend was in trouble occured when

Tweezer Bottom formation consists of two candlesticks:

Sometimes Tweezer Tops or Bottoms have three candlesticks.

A bearish Tweezer Top occurs during an uptrend when bulls take

The reverse, a bullish Tweezer Bottomoccurs during a downtrend

Nevertheless, Day 2 is completely opposite because prices open and

1. The first bar is a large red candlestick located within a

As shown by the chart, this pattern is used by traders as an

early indication that the downtrend is about to reverse.

Day 2 was a Doji, which is a candlestick signifying indecision.

The Morning Star pattern is a very powerful three

1. The first bar is a large white candlestick located within

As shown by the chart below, this pattern is used by traders

as an early indication that the uptrend is about to reverse.

The Evening Star pattern is a very powerful three candlestick

Tri-Star - A single Doji candlestick is an infrequent occurrence

Bullish previous day. Bearish

Entry: Confirming the reversal pattern - Exit:

Exit: Defining a target and stop -

an overall trend change.