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Bullish vs. Bearish Candlestick Chart Patterns

By (Rain İçerik Ekibi - Jun 06, 7:00 PM

Technical candlestick chart analysis is immensely popular among professional and hobby traders alike, and with good reasons. Patterns, or even a single candlestick can often accurately determine the next move of prices, which can unlock consistent profits for whoever chooses to leverage them. In this article, we’ll touch on the market’s favorite candlestick chart patterns that either foreshadow bullish, or bearish price actions—stay tuned to see them all. 

Candlestick Chart Technical Analysis in a Nutshell

Before jumping into the specifics, let’s take a look at some essential definitions of technical chart analysis. First, when looking at such charts, one should always ensure that the time frame used is consistent throughout the entire trading cycle. This means that if a pattern is first observed on a 15-minute chart, for instance, it should be continued to be monitored on that same setting. Switching the time frame to 30 minutes in the meantime could cause misleading patterns that confuse the trader and result in unexpected price movements afterwards.

Another aspect everyone should consider is the risks involved with all patterns. There will be times when prices will not move towards the direction the pattern or formation would suggest, which could be caused by higher time frame trends or sudden news-based sell-offs and buy-ins. Nonetheless, let’s see the top bullish and bearish signs that traders look at.

Bullish Candlestick Chart Patterns

A bullish candlestick chart pattern or candle forecasts an increase in price, but one must carefully be following the exact entry and exit points to secure the gains.

Hammer

A hammer is one of the most popular signs traders follow, as it is a single candlestick that has a relatively long green body without any wick on the top and a long wick on the bottom. The trading world says that the hammer hits the prices from below and pushes them upward after it has been formed.

Dragonfly Doji Bar

Next to the hammer, the Dragonfly Doji bar is the most used single-candlestick formation traders use to spot a bullish trend. A Doji bar, in general, is a candlestick that has a very narrow, almost non-existent body and usually wicks on both sides. The Dragonfly Doji bar actually only has a long wick on the bottom, and a very narrow, almost linear body. This indicates that despite the pressure from sellers (hence the long wick on the bottom), buyers saved the price and fended off the attack, which is expected to ignite a positive trend immediately after.

Bullish Harami

A Bullish Harami is a bit harder to spot as it consists of two candlesticks, one long bodied red candle followed by a shorter bodied green floating around the middle of the red. This pattern suggests that the price bounced back from the red candle’s floor and should continue to rise after the green candle.

Bullish Abandoned Baby

The Bullish Abandoned Baby is a descriptively named pattern. It consists of three candlesticks, namely a red bodied one with wicks on both ends, a lower situated, smaller, green candlestick that resembles a hammer, and a green candlestick that is identical to the red one both in size and positioning.

Bearish Candlestick Chart Patterns

Now we move to the bearish candlestick patterns that foreshadow drops in price.

Hanging Man

Hanging Man sounds negative, and it is actually. Essentially, it is a red hammer that appears after a bullish section. It usually sends prices back down the same way the positive trend built them up before the indicator. 

Gravestone Doji Bar

A Gravestone Doji bar is among the most powerful, yet easiest bearish patterns to spot. It basically is an incredibly thin bodied candlestick with a huge wick on top, and little to no wick on the bottom. If such a candlestick appears after positive price movements, the pattern is expected to reverse sharply as the Doji’s top wick indicates a failed attempt from buyers and a huge victory for sellers who will continue to apply pressure and drive prices down.

Bearish Engulfing

A Bearish Engulfing requires careful attention, as it is quite challenging to detect. This two-candlestick pattern consists of a green normal bodied candle with wicks on both ends followed by a longer, red candle with wicks on either side. The tricky part is that the center point of both candlesticks has to be the same in order to confirm the pattern.

Evening Doji Star

Last, but not least, an Evening Doji Star is a three-candle pattern that indicates a massive drop after a relatively promising uptrend. To spot the pattern, look for a green long bodied candle with a longer bottom wick followed by a small wick Doji bar that resembles a star in its shape, and a red candlestick with a longer bottom wick after. Some argue that trades can already be triggered once the Doji bar itself is formed without the need to wait for the third candlestick to close as well.

Ending Remarks

There you have it, the most popular candlestick chart patterns, both bearish and bullish. Remember, while technical chart analysis has proven many times that it can be a great decision basis, it does not guarantee results. In any case, you could give these a try, to either profit from positive price movements, or potentially save yourself from losses.

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