TOP 4 BEARISH CHART PATTERNS

 BEARISH CART PATTERNS :: EVERY TRADER SHOULD KNOW

INVERTED CUP WITH HANDLE

Directional Bias: Bearish

Pattern Type: Continuation

Pattern Description: This pattern occurs within the context of a longer downtrend and is characterized by the price forming an inverted u-shaped cup with a short handle on the right. The duration of the cup should last at least 7 weeks if using a daily chart.

Volume Description: Volume will typically follow the opposite of the shape of the cup, with high volume as the left lip forms, falling volume as the rounded top of the cup forms and rising volume toward the right lip and on the breakout.

Breakout Confirmation: A close below the lower trend-line drawn across the handle with above average volume.

Measuring Technique: The price target is obtained by measuring the right lip to the top of the cup and then subtracted from the price level of the right lip.

Statistical Notes: The pattern has a low failure rate but doesn’t move as strongly as other patterns. Patterns with shorter handles perform better than longer handles, and deeper cups with the left lip slightly lower than the right lip perform better.

DIAMOND TOP

Directional Bias: Bearish

 Pattern Type: Reversal

Pattern Description: This pattern occurs within the context of a longer uptrend. Initially the pattern begins a broadening formation with higher highs and lower lows, but then begins to narrow with lower highs and higher lows.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-line drawn across the upward-sloping highs with above average volume.

Measuring Technique: Measure the widest point of the diamond’s range and subtract it from the breakout level.

 

Statistical Notes: Breakouts near the 1-year high typically outperform, and pullbacks following the breakout generally hurt performance. The pattern has a low failure rate with decent upside potential but tend to fallback once the target high is reached. Formations with more range between highs and lows perform better than shorter ranges.

 

             

   DOUBLE TOP

Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the context of a longer uptrend. The pattern forms two equal highs with each high forming a v shaped top with a single day’s candle touching the high.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-line drawn horizontally across the intervening low between the highs with above average volume.

Measuring Technique: Measure the distance between the low and the two highs and subtract it from the breakout level.

Statistical Notes: Formations with more range between highs and lows perform better than shorter ranges.

 

FLAG BEARISH

Directional Bias: Bearish

Pattern Type: Continuation

Pattern Description: This pattern occurs within the context of a longer downtrend and following a steep, quick downward move. Following the move, the pattern then forms a short horizontal or upward sloping channel shaped like a flag. The flag portion of the pattern shouldn’t last more than 3-4 weeks if on a daily chart.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-line drawn across the lows with above average volume.

Measuring Technique: Measure the length of the previous steep move leading into the flag, and then subtract that amount from the breakout level.

Statistical Notes: Formations with more range between highs and lows perform better than shorter ranges. Flag formations that breakout in the direction of the prevailing market trend tend to perform better, and flags without gaps tend to perform better. Bull flags typically perform better than bear flags.

HOW DO YOU PREDICT BULISH PATTERNS

BULLISH CHART PATTERNS ::  EVERY TRADER SHOULD KNOW

CUP WITH HANDLE

 Directional Bias: Bullish

 Pattern Type: Continuation

Pattern Description: This pattern occurs within the context of a longer uptrend and is characterized by the price forming a u-shaped cup with a short handle on the right. The duration of the cup should last at least 7 weeks if using a daily chart.

Volume Description: Volume will typically follow the shape of the cup, with high volume as the left lip forms, falling volume as the bottom of the cup forms and rising volume toward the right lip and on the breakout.

Breakout Confirmation: A close above the upper trend-line drawn across the handle with above average volume.

Measuring Technique: The price target is obtained by measuring the right lip to the bottom of the cup and then added to the price level of the right lip.

Statistical Notes: The pattern has a low failure rate but doesn’t move as strongly as other patterns. Patterns with shorter handles perform better than longer handles, and deeper cups with the left lip slightly higher than the right lip perform better.

DIAMOND BOTTOM

 Directional Bias: Bullish

 Pattern Type: Reversal

Pattern Description: This pattern occurs within the context of a longer downtrend. Initially the pattern begins a broadening formation with higher highs and lower lows, but then begins to narrow with lower highs and higher lows.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-line drawn across the downward-sloping highs with above average volume.

Measuring Technique: Measure the widest point of the diamond’s range and add it to the breakout level.

Statistical Notes: Breakouts nears the 1-year low typically outperform, and throwbacks following the breakout generally hurt performance. The pattern has a low failure rate with decent upside potential but tend to fallback once the target high is reached. Formations with more range between highs and lows perform better than shorter ranges.

 

DOUBLE BOTTOMS

Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the context of a longer downtrend. The pattern forms two equal lows with each low forming a v shaped bottom with a single day’s candle touching the low.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-line drawn horizontally across the intervening high between the lows with above average volume.

Measuring Technique: Measure the distance between the high and the two lows and add it to the breakout level.

Statistical Notes: Formations with more range between highs and lows perform better than shorter ranges.

FLAG BULLISH

Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern occurs within the context of a longer uptrend and following a steep, quick upward move. Following the move, the pattern then forms a short horizontal or downward sloping channel shaped like a flag. The flag portion of the pattern shouldn’t last more than 3-4 weeks if on a daily chart.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-line drawn across the highs with above average volume.

Measuring Technique: Measure the length of the previous steep move leading into the flag, and then add that amount to the breakout level.

Statistical Notes: Formations with more range between highs and lows perform better than shorter ranges. Flag formations that breakout in the direction of the prevailing market trend tend to perform better, and flags without gaps tend to perform better.

INVERTED HEAD AND SHOULDER

Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs at the bottom of a downtrend and is identified by three-valley formation with the center valley, or low, forming a lower low than the other two. The neckline is a trend-line that is drawn across the intervening highs and should be horizontal or downward sloping to the breakout area. There should be a degree of symmetry between the formation of the two shoulders and the head.

Volume Description: Volume tends to be high leading into the down move of the first shoulder, diminishes as the price rises completing the left shoulder, is balanced during the formation of the head, and expands as the price breaks above the neckline.

Breakout Confirmation: A close above the neckline with above average volume.

Measuring Technique: Measure the distance between the first high to the low of the head, and then add that amount to the neckline on the breakout.

Six bearish candlestick patterns every traders must to know

 What is Candlesticks patterns -

Candlesticks patterns are used to predict the future direction of price movement. The most 16 common candlesticks patterns and use of them to identify the opportunities while trading.

 

What is the candlestick

 

A candlestick is a way to display the information about an asset’s price movement. It is one of the most popular components of technical analysis and to catch the price action on the movement.

 

The candlesticks have three basic features :

•   The body, which represents the open-to-close range
•   The wick. Or shadow, that indicates the intraday high and low
•  The colour, which reveals the direction of stock movement basically green body indicates a price increase and red body shows a price decrease.

 Before you start trading, its important to familiarize yourself with the basics of candlestick and the only way to understand is “PRACTISE READING CANDLESTICK PATTERNS”.

The best way to learn to read candlestick patterns is to practice entering and exiting trades from the signals they give. You can develop your skills in Demat – trading account, you may open by clicking below:

https://zerodha.com/?c=AY8398&s=CONSOLE

Six bearish candlestick patterns

Bearish candlestick patterns usually form after an uptrend and signal a point of resistance. Heavy pessimism about the market price often causes traders to close their long positions and open a short position to take advantage of the falling price.

 

Hanging man

The hanging man is the bearish equivalent of hammer : it has the same shape but forms at the end of an uptrend.

It indicates that there was a significant sell-off during the day, but that buyers were able to push the price up again. The large sell – off is often seen as an indication that the bulls are losing control of the market.

It formed like – 

Shooting star

The shooting star is the same shape as the inverted hammer, but is formed in an uptrend: it has a small lower body, and a long upper wick.

Usually, the market will gap slightly higher on opening and rally to an intra-day high before closing at a price just above the open – like a star falling to the ground. 

It formed like –  

Bearish engulfing

A bearish engulfing pattern occurs at the end of an uptrend. The first candle has a small green body that is engulfed by a subsequent long red candle.

It signifies slowdown of price movement and sign of an impending market downturn.

It formed like – 

Evening Star

The evening star is a three- candlestick pattern that is the equivalent of the bullish morning star. It is formed of a short candle sandwiched between a long green candle and a large red candlestick.

It indicates the reversal of an uptrend and is particularly strong when the third candlestick erases the gain of the first candle.

It formed like –

 

 Three black crows

The three black crows candlestick pattern comprises of three consecutive long red candles with short or non existent wicks. Each session opens at a similar price to the previous day but selling pressures push the price lower and lower with each close.

Traders interpret this pattern as the start of  a bearish downtrend as the sellers have overtaken the buyers during three successive trading days.

It formed like –

 

Dark cloud cover

The dark cloud cover candlestick pattern indicates a bearish reversal – a black cloud over the previous days optimism. It comprises two candlesticks; a red candlestick which opens above the previous green body and closes below its midpoint.

It signals that the bears have taken over the session pushing the price sharply lower. If the wicks of the candles are short it suggests that the downtrend was extremely critical.

It formed like – 

 

Six bullish candlestick patterns every traders must to know

 

What is Candlesticks patterns -

Candlesticks patterns are used to predict the future direction of price movement. The most 16 common candlesticks patterns and use of them to identify the opportunities while trading.

 

What is the candlestick

 

A candlestick is a way to display the information about an asset’s price movement. It is one of the most popular components of technical analysis and to catch the price action on the movement.

 

The candlesticks have three basic features :

•   The body, which represents the open-to-close range
•   The wick. Or shadow, that indicates the intraday high and low
•  The colour, which reveals the direction of stock movement basically green body indicates a price increase and red body shows a price decrease.

 Before you start trading, its important to familiarize yourself with the basics of candlestick and the only way to understand is “PRACTISE READING CANDLESTICK PATTERNS”.

The best way to learn to read candlestick patterns is to practice entering and exiting trades from the signals they give. You can develop your skills in Demat – trading account, you may open by clicking below:

https://zerodha.com/?c=AY8398&s=CONSOLE

Six bullish candlestick patterns  

Bullish patterns may form after a market downtrend, and signal a reversal of price movement. They are an indicator for traders to consider opening a long position to profit from any upward trajectory.

Hammer

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.  A hammer shows that although there were selling pressures during the day, ultimately a strong buying pressure drove the price back up. The color of the body can vary but green hammers indicate a stronger bull market then red hammers.

It formed like – 

Inverse hammer

A similarly bullish pattern is the inverted hammer, the only difference being that the upper wick is long, while the lower wick is short.

 

It indicates a buying pressure, followed by a selling pressure that was not strong enough to drive the market price down. The inverse hammer suggests that buyer will soon have control of the market.

It formed like – 

 

 

Bullish engulfing

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

Though the second day opens lower than the first, the bullish market pushes the price up, climaxing in an clear win for buyers.

It formed like – 

Piercing line

The piercing line is also a two-stick pattern, made up of a long red candle, followed by a long green candle.

There is usually a significant gap down between the first candlesticks closing price, and the green candlesticks opening. It indicates a strong buying pressure, as the price is pushed  up to or above the mid - price of the previous day.

It formed like – 

 

Morning star

The morning star candlestick pattern is considered a sign of hope in a bleak market downtrend. It is a three-stick pattern : one short-bodied candle between a long red and a long green. Traditionally, the ‘star’ will have no overlap with the longer bodies, as the market gaps both on open and close.

It signals that the selling pressure of the first day is subsiding, and a bull market is on the horizon. 

It formed like – 

 

Three white soldiers

The three white soldiers pattern occurs over three days. It consists of consecutive long green candles with small wicks, which open and close progressively higher then the pervious day.

It is a very strong bullish signal that occurs after a downtrend and shows a steady advance of buying pressure.

It formed like – 

Four continuous candlesticks pattern every trader must to know

 

What is Candlesticks patterns -

Candlesticks patterns are used to predict the future direction of price movement. The most 16 common candlesticks patterns and use of them to identify the opportunities while trading.

What is the candlestick

A candlestick is a way to display the information about an asset’s price movement. It is one of the most popular components of technical analysis and to catch the price action on the movement.

 

The candlesticks have three basic features :

•   The body, which represents the open-to-close range
•   The wick. Or shadow, that indicates the intraday high and low
•  The colour, which reveals the direction of stock movement basically green body indicates a price increase and red body shows a price decrease.

 Before you start trading, its important to familiarize yourself with the basics of candlestick and the only way to understand is “PRACTISE READING CANDLESTICK PATTERNS”.

The best way to learn to read candlestick patterns is to practice entering and exiting trades from the signals they give. You can develop your skills in Demat – trading account, you may open by clicking below :

 https://zerodha.com/?c=AY8398&s=CONSOLE

Four continuous candlesticks pattern

Doji

When a markets open and close are almost at the same price point the candlestick resembles a cross or plus sign – traders should look out for a short to non-existent body, with wicks of varying length.

This doji pattern indicate a struggle between buyer and seller. Alone doji is neutral signal but it can be found in reversal patterns such as the bullish morning and bearish evening star.

It formed like –

 

Spinning top

The spinning top candlestick pattern has a short body cantered between wicks of equal length. The pattern indicates indecision in the market resulting in no meaningful change in price: the bulls sent the price higher while the bears pushed it low again. It signifies that the current market pressure is losing control.

It formed like –

 

 Falling three methods

Three method formation patterns are used to predict the continuation of a current trend be it bearish or bullish.

The bearish pattern is called the “ falling three methods”. It indicate traders that bull do not have enough strength to reverse the trend.

It formed like –

 

Rising three methods

The opposite is true for the bullish pattern called the “Rising three methods”. It comprises of three short red candles within the range of two long greens.

The pattern shows traders that, despite some selling pressure, buyer are retaining control of the market.

 

It formed like –