Basic Candlestick Patterns Flashcards
1
Q
Hammer
A
- Is a good indicator that a change trend might occur
- Appears at the bottom of a downtrend
- Real body is green and at the top of the day’s trading range. The lower shadow should be twice the height of the real body and it should have a shaven head
2
Q
Hanging Man
A
- Is a good indicator that a change trend might occur
- Appears at the top of an uptrend
- Real body is red and at the top of the day’s trading range. The lower shadow should be twice the height of the real body and it should have a shaven head
3
Q
Engulfing Pattern
A
- Uses 2 candlesticks to prophesy a major trend reversal
- The stock has to be in a definite up or downtrend - even if short term
- The 2nd real body should be the opposite color of the prior real body
- The 2nd real body has to engulf the prior real body - although it need not engulf its shadow
- This pattern becomes even more obvious if the first real body is quite petite and the 2nd very long.
- If the 2nd real body engulfs an additional real body the signal grows stronger
4
Q
Dark Cloud Cover
A
- Is a bearish reversal pattern which appears when an uptrend has run out of steam or at the conclusion of a congestion movement
- consists of 2 candlesticks
- 1st candlestick is a strong, green real body
- 2nd candlestick’s price gaps open above the top of the green body and its shadow, if any
- the 2nd body closes well into the green body and near its own low. The more it moves into the lower part of the first, green body, the higher probability that the bears are taking over
- if a long green body closes above the highs of either the dark cloud cover or the bearish engulfing pattern, it suggests the start of another rally
5
Q
Bullish Piercing Pattern
A
- the opposite of the dark cloud cover
- the 1st real body is a red body in the context of a falling price move
- the 2nd is a green real body, in which the stock gaps open lower than the previous candlestick’s low
- the price rises higher and the real body closes more than midway into the prior red real body.
- If the real body doesn’t close at least halfway or more into the red body, it negates the signal and indicates the downtrend may continue
6
Q
“key reversal day”
A
If the green real body opens lower than the previous day’s low and closes higher than the previous day’s high
7
Q
Evening Star
A
- denotes a bearish reversal in an uptrend
- 3 candlesticks are needed
- the 1st 2 candlesticks are composed of a long green real body followed by a star with a small body that can be green or red
- the star suggests the top of the uptrend
- the 3rd candlestick is a real red body that drops low into the range of the 1st green candlestick
8
Q
Morning Star
A
- foretells a bullish reversal in a downtrend
- 3 candlesticks needed
- 1st 2 are composed of a long red body followed by a star with a small body that is either red or green. The star gaps open lower than the previous real body’s close
- the 3rd star is a green real body that moves into the price range of the 1st, red real body
9
Q
What is a doji
A
- a doji is created when a candlestick opens and closes at, or very near the same price
- doji resemble crosses
- doji stars are doji that gap open either above or below the previous real body in an up or downtrend
- they represent powerful reversal indicators
10
Q
Evening Doji Star
A
- warns of the potential top of an uptrend
- gaps open above the green real body next to it
- The next candlestick is a red real body that descends into the green real body of the candlestick formed prior to the evening dog star.
- If the next candlestick after the evening doji star is a green real body, the doji warning is negated
11
Q
Morning Doji Star
A
- indicates a possible bottom in a downtrend
- it gaps open below the red real body prior to it
- the next green real body opens higher, and the price rises into the area of the red body prior to the morning doji star.
- if the next candlestick after a morning doji star is a red real body, the doji downtrend reversal is negated
12
Q
what is the shooting star?
A
- this pattern consists of a small real body, either red or green, with a long upper shadow
- the shooting star appears at the top of moves up, warning that the bull’s buying power is deteriorating
- this sign acts on the negative pattern only when the next days candles open lower and moves lower
13
Q
What is the gravestone doji?
A
- has a long upper shadow, but the candle opens and closes at the low of the day - an ominous sign
- this sign acts on the negative pattern only when the next days candles opens lower and moves lower
