candlestickpattern.ppt
- 1. Investment Insights Investment Insights Candlestick Patterns StockStream LLP
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- 4. - 4 - All about investments. © StockStream LLP Introduction • Extensively used in technical analysis. • Candlestick patterns reflect the market emotions. • Indicates changes in sentiment giving early signals of trend reversal or continuation. • Shows the opening price, closing price, low and high made for the time period. • Ability to look at intra-period market sentiment.
- 5. - 5 - All about investments. © StockStream LLP Bearish Engulfing Pattern • Formation of this pattern in an uptrend indicates a top formation. • Markets open above the previous close and end below the previous open. • This pattern indicates that selling pressure has overcome buying interest. • Trading Strategy: o Sell on formation of bearish engulfing pattern. o Stop above the high of the bearish candle. o Determine target using other technical indicators.
- 6. - 6 - All about investments. © StockStream LLP Bullish Engulfing Pattern • Formation of this pattern in a downtrend indicates a bottom formation. • Markets open below the previous close and end above the previous open. • This pattern indicates that buying pressure has overcome selling interest. • Trading Strategy: o Buy on formation of bullish engulfing pattern. o Stop below the low of the bullish candle. o Determine target using other technical indicators.
- 7. - 7 - All about investments. © StockStream LLP Dark Cloud Cover • Formation of this pattern in an uptrend indicates a top formation. • Markets open above the previous close and ends close to the low of the previous day. • Greater penetration into previous days candle indicates stronger signal. • Trading Strategy: o Sell on formation of the dark cloud cover pattern. o Stop above the high of the bearish candle. o Determine target using other technical indicators.
- 8. - 8 - All about investments. © StockStream LLP Piercing Line • Formation of this pattern in a downtrend indicates a bottom formation. • Markets open below the previous close and ends close to the high of the previous day. • Greater penetration into previous days candle indicates stronger signal. • Trading Strategy: o Buy on formation of the piercing line pattern. o Stop below the low of the bullish candle. o Determine target using other technical indicators.
- 9. - 9 - All about investments. © StockStream LLP Hammer • Shows a long lower shadow and a small body. The body can be bullish (blue) or bearish (red) • The longer the shadow and smaller the body the more bullish the pattern. A bullish body gives a stronger signal than a bearish body. • The long shadow indicates buying interest at lower levels. • Trading Strategy: o Buy on a bullish candle close after the hammer. o Stop below the low of the hammer. o Determine target using other technical indicators.
- 10. - 10 - All about investments. © StockStream LLP Hanging Man • Shows a long lower shadow and a small body. The body can be bullish (blue) or bearish (red) • The longer the shadow and smaller the body the more bearish the pattern. A bearish (red) body gives a stronger signal than a bullish (blue) body. • The pattern indicates that the market is having problems moving higher and selling interest is coming at higher levels. • Trading Strategy: o Sell on a bearish candle close after the hanging man. o Stop above the high of the hanging man. o Determine target using other technical indicators.
- 11. - 11 - All about investments. © StockStream LLP Morning Star • This is a bottom reversal pattern. • This is a three candlestick pattern. The first candle is bearish, the second is bullish with a small body and a gap open below the close of the bearish candle. The third candle is a bullish candle confirming change in sentiment. • Trading Strategy: o Buy on a formation of the morning star pattern. o Stop below the low of the middle candle. o Determine target using other technical indicators.
- 12. - 12 - All about investments. © StockStream LLP Evening Star • This is a top reversal pattern. • This is a three candlestick pattern. The first candle is bullish, the second is bearish with a small body and a gap open above the close of the bullish candle. The third candle is a bearish candle confirming change in sentiment. • Trading Strategy: o Sell on a formation of the evening star pattern. o Stop above the high of the middle candle. o Determine target using other technical indicators.
- 13. - 13 - All about investments. © StockStream LLP Shooting Star • This is a top reversal pattern. It is not as strong as an evening star. • The pattern has a long top shadow with a small body indicating selling pressure at higher levels. • Trading Strategy: o Sell on a confirmation of the shooting star pattern with another bearish candle. o Stop above the high of the shooting star candle. o Determine target using other technical indicators.
- 14. - 14 - All about investments. © StockStream LLP Inverted Hammer • This is a bottom reversal pattern. • Looks like an shooting star pattern but formed at the end of a downtrend. • The pattern has a long top shadow with a small body indicating buying interest at lower levels. • Trading Strategy: o Buy on a confirmation of the inverted hammer pattern with another bullish candle. o Stop below the low of the candle. o Determine target using other technical indicators.
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