The Shooting Star
The Shooting Star Pattern
The Shooting Star is similar to the Evening Star. It is a bearish top reversal pattern that may appear in an uptrend and warns of a possible trend reversal. Where the shooting star differs from the evening star is in the shape of the star, which, in the case of the shooting star, has a long upper shadow like a shooting star and no or very little lower shadow. In other words, the star in the shooting star pattern takes the form of an inverted hammer rather than a doji or a spinning top.
As with the evening star, the shooting star formation consists of three candlesticks, with the middle candlestick being the star. The first candlestick must be light in color and must have a relatively large real body. The second candlestick is the star with a short real body that gaps away from the real body of the first candlestick. The star may form within the upper shadow of the first candlestick. The star implies a weakness in the uptrend as the price rallied and then decline to close closer to the open price. However, the ascending gap between the first candlestick and the star also has a bullish implication. Thus, the third candlestick in the formation must confirm the pattern and must be a dark candlestick that closes well into the body of the first candlestick.
As with the evening star, the reliability of the shooting star is enhanced when the real body of the third candlestick gaps away from the real body of the star. The reliability of the pattern is also enhanced by the extent to which the real body of the third candlestick penetrates the real body of the first candlestick, and if the volume on the first candlestick is lower and the volume on the third candlestick is higher.
The Evening Doji Star
Star patterns are trend reversal patterns that consist of three candlesticks, with the middle candles stick forming the star. A star is a candlestick with a short real body, like a doji or a spinning top, that gaps away from the real body of the preceding candlestick. There are three basic star patterns: the morning star, which appears in a downtrend; and the evening star and the shooting star, which appear in an uptrend.
The morning star and the evening star have a doji or a spinning top as the second candle...
Three Black Crows
The Three Black Crows pattern is the bearish counterpart of the Three Advancing White Soldiers pattern. It is a reversal pattern that consists of three bearish candlesticks that should come into consideration when it appears within an established uptrend, where it indicates a weakness in the uptrend and, potentially, the beginning of a down trend.
Each of the three candlesticks in the Three Black Crows pattern should be relatively long bearish candlesticks with little or no lower shadows. Each of the candlesticks in this pattern should mark a steady decline in ...
The Tweezers Top and Tweezers Bottom patterns are minor trend reversal patterns that consist of two candlesticks with the same approximate high or the same approximate low respectively. The two candlesticks should have alternating colors with the first confirming the current trend and the second indicating a weakness in the trend. The reliability of these patterns increase when the first candlestick is has a large real body while the second candlestick has a short real body.
In the Tweezers Top pattern, the first candlestick should be a bullish candlestick with a ...
Bullish Harami Pattern
'Harami' is an old Japanese word that means pregnant and describes this pattern quite well. The harami pattern consists of two candlesticks with the first candlestick being the mother that completely encloses the second, smaller candlestick. It is a reversal candlestick pattern that can appear in either an uptrend or a downtrend. When the second candlestick is a doji, the pattern is called a harami cross and is more significant than the normal harami pattern as the doji's lack of a real body indicates great indecision and uncertainty.
When the harami pattern is ...
Continuation patterns indicate that there is a greater probability of the continuation of a trend than a trend reversal.. These patterns are generally formed when the price action enters a consolidation phase during a pre-existing trend. During the consolidation phase, the trend appears to change; however, the continuation of the preceding trend is more probable.
Some of the common continuation patterns include the cup and handle pattern, flags and pennants, symmetrical triangles, ascending triangle and desc...
Reversal patterns mark the turning point of an existing trend and are good indicators for taking profit or reversing your position. Generally, trend reversal patterns indicate that a support level in a downtrend or a resistance level in an uptrend will hold and that the pre-existing trend will start to reverse. These patterns allow you to enter early in the establishment of the new trend and are usually result in very profitable trades.
The common reversal patterns include the double tops and double bottoms, triple tops and triple bottoms, broadening tops and broadening bottoms, ...