Candle
sticks are a powerful tool used in charting and technical analysis. They
deconstruct the share price data by displaying four different sets of data in
one “candle”. The candle can be seen below. The four sets of data displayed
are: high, low, open, and close. Candle sticks can cover different time periods
- daily, weekly, monthly, etc - as long as the consistency of representation is
the same. The placement of each can be seen in the pictures below. The green
candle is termed a bullish candle and the red candle is termed a bearish
candle.
Bullish Candle
A
bullish candle occurs when the closing price of a share closes higher than the
opening price. This means that the share price increased on a particular day or
period. This can be seen in the picture where the close is above the opening
price.
Bearish Candle
A
bearish candle occurs when the closing price of a share closes below the
opening price. This means that the share price decreased on a particular day or
period. This can be seen in the picture where the close is below the opening
price.
Bullish Engulfing Pattern
The
method to identify a Bullish Engulfing pattern is to ensure that the following
entities are present: The first red bearish candle must be fully enclosed in
the body of the green candle. There must be a confirmation candle to follow the
middle bullish candle with a close above the close of the middle candle.
Bearish engulfing pattern.
The method to identify
a Bearish Engulfing pattern is to ensure that the following entities are
present: The first green bullish candle must be fully enclosed in the body of
the red middle candle. There must be a confirmation candle to follow the middle
bullish candle with a close above the close of the middle candle.
Bullish Harami Pattern
The method to identify a bullish harami pattern is to ensure that the following entities are present: Two downward
movement candles with the third being a bullish candle with a body located
within the second candle's body. There must be a confirmation candle to follow
the second bullish candle with a close above the close of the third candle.
Bearish Harami pattern
The method to identify a Bearish Harami pattern is to ensure that the following entities are present: Two upward movement candles with the third being a bearish candle with a body located within the second candle's body. There must be a confirmation candle to follow the second bearish candle with a close below the close of the third candle
Shooting Star pattern
A Shooting Star pattern is a bearish
pattern that indicates downward movement. The method to identify a shooting
star pattern is to ensure that the following entities are present: The share
price must be moving on an upward trend. The wick of the candle must be at
least 2 times the body of the candle. A confirmation candle is needed with a
close below the close of the close of the middle candle"
Bearish Hammer pattern
A Bearish Hammer pattern is similar to a the shooting star pattern and indicates
downward movement but is less bearish than a shooting star formation. The
method to identify a bearish hammer pattern is to ensure that the following
entities are present: The share price must be moving on an upward trend. The
tail of the candle must be at least two times the body of the candle. A
confirmation candle is needed with a close below the close of the close of the
middle candle.
Bullish Hammer pattern
A Bullish Hammer
pattern indicates upward movement. The method to identify a bullish hammer
pattern is to ensure that the following entities are present: The share price
must be moving on a downward trend. The tail of the middle candle must be at
least two times the body of the candle. A confirmation candle is needed with a close
above the close of the middle candle.
Inverted Hammer Pattern
An
Inverted Hammer pattern indicates upward movement but is slightly less bullish
than a bullish hammer pattern. The method to identify an inverted hammer
pattern is to ensure that the following entities are present: The share price
must be moving on a downward trend. The wick of the middle candle must be at
least two times the body of the candle. A confirmation candle is needed with a
close above the close of the middle candle.
Rising Sun
The way to identify a
Rising Sun is by looking at the following things and ensuring that they are
present. The left most candle must have an opening price above that of the
middle candles closing price. The left most candle must have a closing price
within the middle candle and with the closing price no lower than half of the
middle candles body. Lastly there must be a confirmation, this is where the
candle on the right has a closing value above the body of the middle candle.
Morning Star pattern
The way to identify a
Morning Star pattern is by looking at the following things and ensuring that
they are present. 1st, a long red candle stick. 2nd, a small green candle
stick, comprising of a small body or open equal to the close, which is below
the close of the 1st candle. 3rd, a long green candle stick with an open above
that of the middle candle stick which closes at or above the center of the
first candle stick.
Evening Star pattern
The way to identify an Evening Star pattern is by looking at the following things and ensuring that
they are present. 1st, a long green candle stick. 2nd, a small green candle
stick, comprising of a small body or open equal to the close, which is above
the close of the 1st candle. 3rd, a long red candle stick with an open below
that of the middle candle stick which closes at or below the center of the
first candle stick
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