๐จ๐งตBEARISH CANDLESTICKS & PATTERNS
On top of utilizing charting patterns, I also look for key candlesticks patterns to identify changes in price action. Here are a few of the basic bearish patterns that I look for every day.
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On top of utilizing charting patterns, I also look for key candlesticks patterns to identify changes in price action. Here are a few of the basic bearish patterns that I look for every day.
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Bearish Engulfing:
This pattern consists of a green candle followed by a large red candlestick that "engulfs" the previous candle. This indicates that sellers have gained momentum and are pushing the price down.
The real body of the red candle must engulf the green candle.
This pattern consists of a green candle followed by a large red candlestick that "engulfs" the previous candle. This indicates that sellers have gained momentum and are pushing the price down.
The real body of the red candle must engulf the green candle.
Bearish Engulfing Example: $GS
Shooting Star:
This candlestick contains a large upper wick with little to no lower wick & a small body near the lower portion of the candle. The candle opens, makes a significant move upwards, then closes near the open. Occurs during an uptrend & indicates a bearish reversal.
This candlestick contains a large upper wick with little to no lower wick & a small body near the lower portion of the candle. The candle opens, makes a significant move upwards, then closes near the open. Occurs during an uptrend & indicates a bearish reversal.
Shooting Star Example: $SNOW & $PINS
Hanging Man:
This candlestick occurs when the underlying has been in an uptrend and the candle has a small real body with a long lower wick. This can indicate a potential reversal in an uptrend.
This candlestick occurs when the underlying has been in an uptrend and the candle has a small real body with a long lower wick. This can indicate a potential reversal in an uptrend.
Hanging Man Example: $BBBY
Hanging Man vs Hammer:
A hanging man and hammer candle look practically identical. The difference is the trend they occur in. A hammer forms within a downtrend and a hanging man forms within an uptrend.
A hanging man and hammer candle look practically identical. The difference is the trend they occur in. A hammer forms within a downtrend and a hanging man forms within an uptrend.
Hanging Man vs Hammer Example:
Dark Cloud Cover:
This pattern occurs when a red candle opens above the close of the previous candle (typically green) & closes below 50% of the previous candle's real body.
This indicates a shift from bullish to bearish action.
This pattern occurs when a red candle opens above the close of the previous candle (typically green) & closes below 50% of the previous candle's real body.
This indicates a shift from bullish to bearish action.
Dark Cloud Cover Example: $MRK
Evening Star:
This pattern forms over three days & is considered a strong indicator of future bearish action.
First Day: Large green candle
Second Day: Smaller candle (increase)
Third-Day: Large red candle. Opens below the previous day & closes near the middle of the first day
This pattern forms over three days & is considered a strong indicator of future bearish action.
First Day: Large green candle
Second Day: Smaller candle (increase)
Third-Day: Large red candle. Opens below the previous day & closes near the middle of the first day
Evening Star Example:
As always, no candlestick works in a vacuum. I use these patterns paired with high-level technical analysis, options flow, moving averages, fibonacci retracements, stochastics, etc. to identify high conviction trading opportunities.
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โค๏ธ & ๐ if you found this helpful ๐ค
โขFor additional trading resources, join the @Kane_Capital discord & check the 100s of pages of free edu under โEducation๐โ
โค๏ธ & ๐ if you found this helpful ๐ค
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