Module 16: Candlestick Patterns
Key Takeaways
- Single and multi-candle patterns reveal shifts in momentum.
- Location matters: patterns at key S/R are far more reliable.
- Always wait for confirmation from the next candle.
Doji
Open and close are nearly equal — a tiny body with wicks. Signals indecision; potential reversal when it appears at a strong level.
Hammer
A small body with a long lower wick at the bottom of a downtrend. Buyers rejected lower prices — a bullish reversal signal.
Hanging man
Looks like a hammer but appears at the top of an uptrend — a bearish warning that sellers are testing.
Shooting star
A small body with a long upper wick after an uptrend. Buyers pushed up but were rejected — bearish reversal.
Engulfing
A two-candle pattern where the second body completely engulfs the first. A bullish engulfing at support is a strong buy signal; a bearish engulfing at resistance is a strong sell signal.
Morning star
A three-candle bullish reversal: a big bearish candle, a small indecision candle, then a big bullish candle. Marks a bottom.
Evening star
The bearish mirror at a top: big bullish, small indecision, big bearish candle.
Three white soldiers
Three consecutive strong bullish candles — powerful bullish momentum, often after a bottom.
Three black crows
Three consecutive strong bearish candles — powerful bearish momentum, often after a top.
A candlestick pattern at a major support/resistance with confluence (e.g. RSI divergence) is worth far more than the same pattern in the middle of nowhere.
Frequently Asked Questions
Master a handful (engulfing, hammer, shooting star, doji) used at key levels rather than memorising dozens.