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Technical Analysis Candlestick charts Part 5

Top Reversals

The following rules are applicable for a top reversal:

  • A top reversal is only possible AFTER an uptrend.
  • Most patterns need a confirmation.
  • A confirmation must appear one up to three candles after the pattern.
  • This confirmation is a big black candle, high volume with the new down move, a falling window, or breaking support.
  • A reversal pattern during price reaction must be considered a continuation pattern.
  • For best results, you must combine candlestick patterns with Western technical analysis.
  • An unconfirmed pattern has no further meaning.
  • Special offer: "Capturing Profit with technical Analysis"
 
Engulfing Bearish

Engulfing bearish

In an uptrend, there is a small white body, not a doji, followed and enclosed by a bigger black body.
Though not necessary, it is better when the black body also encloses the short shadows of the white candle.
An exceptional occurrence at the end of an uptrend is a black body followed by a bigger white body; this is called a last engulfing pattern.

Engulfing bearish example

Dark Cloud Cover

Dark cloud cover

In an uptrend, a bigger white body is followed by a black body with a higher opening price than the high of the white body; however, the black candle closes below the midpoint of the white body.

Confirmation is required.

Dark cloud cover example

Bearish Counterattack

Bearish counterattack

A bearish counterattack is a bigger white candle in an uptrend, followed by a bigger black candle. Closing prices of both candles are at the same price level.

Confirmation is a must.

Bearish counterattack example

Bearish Harami

Bearish harami

In an uptrend, a black (but preferably a white) body is followed by a small white or black candle that is completely covered by the first candle body.

A top reversal signal after confirmation. White-black and white-white combinations are the most common.

Bearish harami example

Bearish Harami Cross

Bearish harami cross

In an uptrend, a black (but preferably a white) body is followed by a doji that is completely covered by the first candle body.

A bearish harami cross pattern needs confirmation.

Bearish harami cross example

Evening Star

Evening star

A bigger white body, followed by one or more small black or white bodies with a rising window above the closing price of the first white body. The black candle that follows ideally lays 50% or more within the first white body and has a falling window with the previous candle body.  

Evening star example

Evening Doji Star

Evening doji star

A bigger white body, followed by one or more doji’s with a rising window above the closing price of the first white body. The black candle that follows ideally lays 50% or more within the first white body and has a falling window with the previous candle body.  

This is a stronger reversal pattern than the evening star.

Evening doji star example

Bearish Abandoned Baby

Bearish abandoned baby

An abandoned baby pattern is an evening doji star with a window between the doji and the white and black candle, resulting in an island reversal. The island can have more candles and more than one doji.

Bearish abandoned baby example

Hanging Man

hanging man

A hanging man is a small white or black body close to the high price. It has a long shadow below, with a minimum size of twice the height of the body. There is a very small shadow or no shadow at the top. A dragonfly doji is a specific version of the hanging man pattern. Confirmation is required.

hanging man example

Bearish Shooting Star

Bearish shooting star

A bearish shooting star is a small white (but preferably a small black) body near the low price. It has a long shadow above that is, at minimum, twice the size of the body. It has a very small shadow or no shadow below. There is a gap between the bodies of the bearish shooting star and the previous candle.
A top reversal only after confirmation.  

Bearish shooting star example

Bearish Gravestone Doji

Bearish gravestone doji

A bearish gravestone doji is a bearish shooting star where the opening, closing, and low prices are all about the same. It has a long shadow above and no shadow below. There is a gap between the bodies of the doji and the previous candle.
A top reversal only after confirmation.   

Bearish gravestone doji example

Tweezer Tops

Tweezer tops

Two or more candles making highs together. Preferably, the highs are made with high prices, but they also can be combinations of any of the other prices. Size and color are not important. This is a reversal pattern that, most of the time, is part of another pattern.

Tweezer tops example

Three Black Crows

Three black crows

Three black candlesticks with each subsequent bar having lower closing prices, close to the low of the bar. Opening prices of candles two and three are within the body of the previous candles.

Many times, there will be a small reaction before the new downtrend is resumed.

Three black crows example

 
Bearish Dumpling Top

Bearish dumpling top

The bearish dumpling top is formed with a number of smaller candles. After this top formation pattern, the price usually makes a down-move with a falling window.

A bearish dumpling top is a powerful reversal pattern.

Bearish dumpling top example

Upside Gap Two Crows

Upside gap two crows

A white candle in an uptrend is followed by a smaller black candle with a gap above the closing price of the white candle. The body of the next black bar completely covers the previous black bar. This bar also has a gap with the closing price of the white candle.

A very rare pattern.

Upside gap two crows example

Two Crows

Two crows

A white candle in an uptrend is followed by a smaller black candle with a gap above the closing price of the white candle. The body of the next black bar has an opening price within the body of the first black bar and a closing price within the body of the white candle.

Confirmation is needed.

Two crows example

 

Candlestick Charts Next -Previous -Part 1 -Part 2 -Part 3 -Part 4 -Part 5 -Part6 -Part7

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