- Candlesticks are usually composed of the body (black or white), and an upper and a lower shadow: The area between the open and the close is called the real body, price excursions above and below the real body are called shadows.
- If the security closed higher than it opened, the body is white with the opening price at the bottom of the body and the closing price at the top.
- If the security closed lower than it opened, the body is black with the opening price at the top and the closing price at the bottom.
- The wick illustrates the highest and lowest traded prices of a security during the time interval represented.
- A candlestick need not have either a body or a wick.
- Modern candlestick charts (especially those displayed digitally) often replace the black or white of the candlestick body with colors such as red (for a lower closing) and blue or green (for a higher closing).
Note: Some softwares uses Black color instead of Red color
ENGULFING
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It consists of a small red body that is contained within the followed large white candlestick. When it appears at bottom it is interpreted as a major reversal signal.
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HAMMER
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A red or a white candlestick that consists of a small body near the high with a little or no upper shadow and a long lower tail. It is considered as a bullish pattern during a downtrend.
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HARAMI
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It consists of an unusually large red body followed by a small white body (contained within large red body). It is considered as a bullish pattern when preceded by an uptrend.
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PIERCING
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It consists of a red candlestick followed by a white candlestick that opens lower than the low of preceding but closes more than halfway into red body candlestick. It is considered as reversal signal when it appears at bottom.
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DOJI
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It is formed when opening and closing prices are virtually the same.. . It is considered as a bullish reversal signal during downtrend.
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BEARISH PATTERNS
Note: Some softwares uses Black color instead of Red color
ENGULFING
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It consists of a small while body that is contained within the followed large red candlestick. When it appears at top it is considered as a major reversal signal.
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SHOOTING STAR
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A red or a white candlestick is formed that has a small body, a long upper shadow and a little or no lower tail. It is considered as a bearish pattern in an uptrend.
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HARAMI
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It consists of an unusually large white body followed by a small red body (contained within large white body). It is considered as a bearish pattern when preceded by an uptrend.
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DARK CLOUD COVER
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It consists of a long white candlestick followed by a red candlestick that opens above the high of the white candlestick and closes well into the body of the white candlestick. It is considered as a bearish reversal signal during an uptrend.
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DOJI
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It is formed when opening and closing prices are virtually the same. It is considered as a bearish reversal signal during an uptrend
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