3. Candlestick Charts

Examples of Popular Candlestick Patterns

  • Bullish hammer pattern

The hammer candlestick pattern is formed of a short body with a long lower wick and is found at the bottom of a downward trend. This pattern is a strong indication that a reversal is about to occur. It tells you that sellers are giving up, and buyers are taking over.

  • Bullish engulfing candlestick

The bullish engulfing pattern is formed of two candlesticks. The first candle is a short red body that is fully engulfed by a bigger green candle.

It is perhaps the most sought after bullish candlestick patterns as it is more confirming of a bullish move in the price of a stock. This pattern shows pure and unquestionable control by the buyers, and almost always results in higher trending prices.

  • Bullish morning star candlestick

The morning star candlestick pattern forms at the bottom of a downtrend and is made up of three candles. The first candle is any long and bearish candle, the second one is a small and indecisive, and the third candle is any long and bullish candle.

This pattern indicates that the selling pressure is cooling, and a bull is on the horizon.

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