6 Candlestick Patterns and Technical Analysis of Trading Market

By understanding the candlestick pattern, you can find out whether the share price will go up or down, you can become an expert in trading by learning it. So you will learn about 6 candlestick patterns in this article

Bullish Harami Candlestick Pattern

Bullish Harami Candlestick Pattern This is a very common candlestick pattern and is also very important because it is formed very often in the chart. Bullish Harami Candlestick Pattern is a two candle pattern.

It is formed by combining two candlesticks and as the name suggests, it gives bullish signals and after the formation of this pattern, there are chances of the stock price going up.

And the word Harami in its name is not Hindi, it is a Japanese word that means pregnant.

Why its name is Harami (Pregnant).

It is called Harami (Pregnant) because the green candle that is formed in it is made inside the red candle, so in appearance, it looks like pregnant ladies in which the red candle is a mother and the green candle is a baby.

Read Also: 6 Candlestick Patterns and Technical Analysis of Trading Market

Right now you are seeing 2 candlestick patterns that are Bullish Harami pattern and to identify it, three conditions must be fulfilled:

Conditions Required for Bullish Harami Candlestick Pattern

1. The stock should be in a downtrend i.e. the share price should be falling.

2. A big red candle is formed in the downtrend and after that big red candle, a green candle is formed as you can see below.

3. The green candle which is formed after the big red candle should be formed inside the body of the red candle.

The open price of the green candle should be above the closing price of the red candle. And the closing price of the green candle should be below the open price of the red candle. Because only then will the green candle be formed inside the body of the red candle.

So when these three conditions are fulfilled then you can be sure that it is Bullish Harami Candlestick Pattern and now the trend may reverse from here till now the stock price was falling down and now it may increase.

So you can entry the next candle after the green candle if it is formed above the green candle and your stop loss will be the lowest point of the red candle.

This pattern gives bullish signals hence its full name is Bullish Harami Candlestick Pattern.

So if you ever see in the chart that a bullish harami pattern is forming then you can consider that the share price may go up from here.

100% Nothing is confirmed in trading but there are high chances that the stock price will go up after the bullish Harami pattern is formed.

Now a question must be coming into your mind that how many minutes candle has to be seen in the chart, so there is no such rule if you are trading intraday then you can see this pattern in the 5 minutes, 10 minutes, 15 minutes chart also.

And if you are taking positions for the short term or doing swing trading then you can also look at daily or weekly charts.

Bearish Harami Candlestick Pattern

Bearish Harami Candlestick Pattern is also understood by its name that it gives a bearish signal. Once this pattern is formed, the stock price may fall.

So whenever the stock is in an uptrend and a big green candle is formed in the uptrend and after that green candle, a small red candle is formed which is formed inside the body of the green candle. Just like you are seeing in the picture below.

So it is a bearish harami candlestick pattern and there is a lot of chance that after this the share price may fall, then you can short selling or sell shares by seeing this pattern.

Conditions Required for Bearish Harami Candlestick Pattern

So for the bearish Harami candlestick pattern to form, three conditions must be fulfilled:

1. Share should be in uptrend i.e. share price should be increasing whereas share should be in a downtrend in Bullish Harami candlestick pattern.
2. A big green candle should be formed in the uptrend and a small red candle should be formed after that green candle.
3. The red candle that is formed after the big green candle should be formed inside the body of the green candle.

So when all these three conditions are fulfilled then you can be sure that it is a Bearish Harami candlestick pattern and the trend may change from here.

Till now the share price was increasing, now it can go down, so you can short-sell here or you can sell the shares.

Hereafter the red candle, if the next candle is formed below it, then you will have to short-sell or take an entry there. And because you are short-sell, your stop-loss here will be the highest point of the big green candle.

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Difference between Bullish Harami Candlestick Pattern and Bearish Harami Candlestick Pattern

Bullish Harami Candlestick Pattern	Bearish Harami Candlestick Pattern
Bullish Harami Candlestick Pattern gives a bullish signal.	Bearish Harami Candlestick Pattern gives a bearish signal.
In Bullish Harami Candlestick Pattern first share is in a downtrend. After that, there are chances of a trend reversal.	In Bearish Harami Candlestick Pattern first share is in an uptrend. After that, there are chances of a trend reversal.
A small green candle is formed in the Bullish Harami Candlestick Pattern.	A small red candle is formed in the Bearish Harami Candlestick Pattern.

So these are the three differences between a Bearish Harami candlestick pattern and a Bullish Harami candlestick pattern.

Piercing Line Candlestick Pattern

This is also a two candle pattern. This pattern is formed by combining two candles and gives a bullish signal. After the formation of this pattern, there is a possibility of the share price going up.

Whenever there is a downtrend in the stock and a big red candle is formed in that downtrend.

And after the formation of that red candle, a green candle is formed which is open below the red candle but closes above the half-body (or say 50% body) of the red candle, then the pattern formed is Piercing Line Candlestick Pattern.

The Piercing Line Candlestick Pattern looks like this as you are seeing in the image below.

So when this pattern is formed, there are high chances that the trend can change from here. Till now the share price was falling, now it can increase, so you can buy here.

This pattern may seem a bit difficult to see, but when you practice, you will very easily start seeing this pattern.

Conditions Required for Piercing Line Candlestick Pattern

To become a Piercing Line Candlestick Pattern, it is necessary to fulfill the following conditions:

1. The stock should be in a downtrend i.e. the share price should be falling.
2. A big red candle should be formed in the downtrend and a green candle should be formed after that red candle.
3. Green candle should open below the first red candle but close above the half body of the first red candle.

So when all these three conditions are fulfilled then you can be sure that it is a Piercing Line Candlestick Pattern and buy here.

In this, you have to entry the next candle after the Piercing Line candlestick pattern and your stop-loss will be below the lowest point of the green candle.

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Dark Cloud Cover Candlestick Pattern

Dark Cloud Cover Candlestick Pattern This is the opposite of the Piercing Line Candlestick Pattern and it is also a two candle pattern but it gives a bearish signal. Once this pattern is formed, the stock price may fall.

So whenever the stock is in an uptrend and a big green candle is formed in the uptrend and after that green candle, a red candle is formed which opens above the green candle.

But when the green candle closes below the half body (or say 50% body), then the pattern that is formed is the Dark Cloud Cover Candlestick Pattern.

Dark Cloud Cover candlestick pattern can be seen in the image below.

So when this pattern is formed then there are a lot of chances that after this the trend may reverse, till now the stock price was rising, now it may fall, so you can short-sell here.

Conditions Required for Dark Cloud Cover Candlestick Pattern

The following conditions must be fulfilled for the Dark Cloud Cover Candlestick Pattern to occur:

1. The stock should be in an uptrend i.e. the share price should be increasing.
2. A big green candle should be formed in the uptrend and after the formation of that green candle, a red candle should be formed.
3. The red candle should be open above the green candle but the close should be below the half body of the red candle.

So when all these three conditions are fulfilled then you can be sure that this is Dark Cloud Cover Candlestick Pattern and here you can short-sell.

If you short-sell then you have to entry the candle after the red candle and your stop-loss will be above the highest point of the red candle.

Read Also: What is Stop-loss order | Stop-loss order vs stop limit order

Morning Star Candlestick Pattern

Morning Star Candlestick Pattern This is a three candlestick pattern. It is formed by combining three candles and gives a bullish signal. After the formation of this pattern, there are chances of the share price increasing.

So whenever the share is in a downtrend and a big red candle is formed in the downtrend. And after that red candle, a small body candle is formed which can be of any color (Red and Green) but the body should be small and both the wick should be equal.

And after that, a big green candle is formed which is equal to or bigger than the first red candle, if such a pattern is formed then it is called Morning Star Candlestick Pattern.

And after the formation of this pattern, there is a lot of chances of increasing the share price, so you can buy here.

And if the third green candle is formed with high volume then it is more effective and then there are high chances that the share price is going to increase then you can buy the share by following this pattern.

Conditions Required for Morning Star Candlestick Pattern

To identify the Morning Star candlestick pattern, it is necessary to fulfill the following conditions:

1. The stock should be in a downtrend i.e. the share price should be falling.
2. A big red candle should be formed in the downtrend. And after that red candle, a candle with a small body and equal wick should be formed as can be seen in the image below.

It is visible in the image that his body is small and both its wicks are equal, it can be of any color (Red and Green), here it is red, even if it was green, it would have been the same thing.

3. A big green candle should be formed after the small candle which is equal to or bigger than the first red candle.

So when all these three conditions are fulfilled then you can be sure that it is a Morning Star candlestick pattern. And you can take entry here also, if the volume increases with the green candle, then it is considered to be a more effective signal.

So if you buy based on the Morning Star candlestick pattern, you can enter the candle after the big green candle and your stop-loss will be the lowest point of the second candle.

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Evening Star Candlestick Pattern

Evening Star Candlestick Pattern This is the opposite of the Morning Star candlestick pattern and it gives a bearish signal.

So whenever the share is in an uptrend and a big green candle is formed in the uptrend and after that green candle a small candle is formed which can be of any color (Red and Green) but its body should be small and both The wick should be equal as can be seen in the image below.

And after that small candle, if a big red candle is formed which is equal to or bigger than the first green candle, then the pattern that is formed is called Evening Star Candlestick Pattern.

And after the formation of this pattern, it is expected that if the share price may fall from here, then you can short-sell here.

Conditions Required for Evening Star Candlestick Pattern

The following conditions must be fulfilled for the Evening Star Candlestick Pattern:

1. The stock should be in an uptrend i.e. the share price should be increasing.
2. A big green candle should be formed in the uptrend and a small candle should be formed after that green candle which can be of any color (green and red) but its body should be small and both the wicks should be equal.
3. After the small candle, a big red candle should be made which should be equal to or bigger than the first green candle.

So when all these three conditions are fulfilled then you can be sure that it is an Evening Star candlestick pattern and you can short-sell here.

In this pattern, you have to short-sell the candle after the third red candle. And because you are short-sell your stop-loss will be slightly above the highest point of the short candle.

So in this way you can trade by understanding these candlestick patterns.

These patterns are very helpful but do not necessarily work every time so always use stop-loss and the more you practice these patterns, the more easily you will be able to identify them. And the more easily you will be able to use them.

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