TA Challenge: Can you recognize the five common bullish candlestick patterns?
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Our previous TA Challenge discussion focused on chart types and their purposes. Today, we will delve into candlestick charts—a useful tool for pattern recognition.
First, let's review the structure of a single candlestick. Each candlestick conveys four critical pieces of price data about the stock: The bottom and top of the body indicate the period's start and end price. The color indicates gain or loss and the wick or shadow shows the price range.
Candlestick charts are useful tools that can cater to different trading styles, such as day trading, swing trading, and long-term trading. These charts often offer insights into the balance of power between buyers and sellers, reversal and consolidation patterns, as well as unresolved market conditions. Now, let's take a look at five common bullish candlestick patterns:
Hammer & Inverse hammer
The hammer candlestick pattern is formed by a short body and a long lower wick. It is typically found at the bottom of a downward trend.
The Hammer has a long lower wick and little to no upper wick. The hammer pattern shown above is an example of how, despite bearish pressure, buyers stepped in and pushed prices higher. While the color of the body may be green or red, a green hammer signals a stronger bullish bias compared to a red one.
Another similar bullish pattern is the Inverted Hammer, which has a long upper wick and little to no lower wick.
The inverted hammer candlestick pictured above features an upper wick, which denotes a surge of buying pressure early in the trading session. Despite ongoing selling pressure, the price remained above the opening level. This pattern suggests that buyers could soon dominate the market sentiment.
Bullish engulfing
The bullish engulfing pattern consists of two candlesticks, with the first being a small red body and the second a large green one that fully engulfs the previous candle.
In the second candle of the bullish engulfing pattern, the price opens below the previous period's low, but buying pressure gradually pushes the price up above the previous high, indicating that buyers have gained momentum and may be taking charge of the market.
Three white soldiers
The three white soldiers are characterized by three green candlesticks in a row, where each one opens within the range of the prior candlestick and closes above its high.
Ideally, the shorter lower wick of the three white soldiers indicates that buying pressure continues to drive prices higher. This pattern is usually observed after a period of downtrend or price consolidation and signals a steady increase in buying pressure.
Morning star
Traders often interpret the morning star as a bullish signal in a market downtrend. This pattern features three candles: a short candle that looks like a star appears between a long red and a long green candle.
The color of the middle "star" candle in the morning star pattern can be either green or red, but its body must not overlap with the previous red candle. This indicates that the previous cycle's selling pressure is now subsiding.
Let's discuss
Which bullish candlestick pattern do you consider the most valuable in trading and why? Share your thoughts with other traders and seize the opportunity to win a $1 cash reward!
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Disclaimer:
This presentation discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve.
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Lucky Bird : Three black crows ? Not useful ?
Asphen : I'm very very passionate about TA. I analyse 50 charts per day as practice.
so all the above comes naturally now.
73514905 : bullish engulfing candle sticks is the most useful pattern for me.
狂飙浪子 : That's it
powerful Hedgehog_57 : I'm still learning. The hammer and inverse hammer are the easiest for me to identify.
Jungle lee : i like three white soldiers the most~
fearless Platypus_10 : I like 3 x white soldiers , a great set up if you get in early on the trade .
UncertainInvader : TA can be useful, but I have run across plenty of candlestick patterns that have not played out. I would suggest learning 3 market conditions:
1. Mechanical markets. In mechanical markets, the push and pull of momentum is the real driving force behind Price Action (another term to learn). This is often, but not exclusively, driven by order volume in the options market. This is most often, not always, driven by mania hypes and panic sell-offs.
2. Technical markets. This is where Tdechnical analysis shines, and candlestick patterns are most consistent. There tends to be little in the way of exciting global/national news events, and the economy is already committed to a stable path.
3. Fundamental markets. Fundamentally driven markets are where earnings reports and macroeconomic factors determine the movement of the markets. The Q4 earnings for $Apple (AAPL.US)$ that released at the beginning of the year was the worst in 6 years. The stock rallied up for 6 months, even with a lackluster Q1 earnings report. It has been in a Mechanical trend along with most of the Tech Sector for H1. Fundamental market trading will occur when the multiple debt bubbles in the USA (National debt, credit cards revolving 1 trillion, used cars 1.5 trillion, inversionof bond yeild curves, etc.) start bursting and hype driven rallies cease, leading to Fundamental correction and likely a period of Technical markets once things stabilize.
104375879 : still learning
MoMo_Kid : Three white Soldiers, great reversal pattern
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