Bullish And Bearish Candlestick Patterns: Everything You Want to Know
This forms an integral basis for technical analysis, with great acceptance and implementation among traders; it helps forecast future market movement using historical price data. They deliver important information regarding the psyche of the market, depicting whether buyers, or bulls, are dominant, or the opposite-case being dominated by sellers or bears. There exist two vast categories: bullish and bearish patterns. They become very crucial indicators to spot turnarounds or continuations in price action at trading. The knowledge of such patterns will greatly enhance your ability to make proper trading decisions.
What are Candlestick Patterns?
A candlestick is a graphical representation of price movements over a specific time frame and tells us about four important price points:
Open: The opening price at the beginning of the time period.
Close: The closing price at the end of the time period.
High: The highest price level during the time period.
Low: The lowest price level during the time period.
A candlestick is composed of a body-the space between the open and close-and wicks, or shadows, which represent high and low prices. The body color represents the direction of the price move: green, or white, for bullish patterns and red, or black, for bearish patterns.
Bullish Candlestick Patterns
Bullish patterns show a possibility of an upside price reversal. They suggest that rising buying pressure may be emerging.
1. Bullish Engulfing
The two-candle bullish engulfing pattern; the first is a bearish candle and the second is a bullish candle that fully engulfs the previous bearish candle. It is a strong buy signal, especially if it occurs after a downtrend.
2. Hammer
Hammer Candlestick: This occurs when the price falls dramatically during the day but then recovers to close near the opening price. The small body at the top with a long lower wick suggests that buyers have stepped in to push prices higher, a very clear bullish reversal signal.
3. Morning Star
Morning Star Pattern: The morning star is a three-candle pattern which often occurs in the tail of a downtrend. The first candle is a bearish one. Following it is a small-bodied candle, signifying that traders have developed some indecision, and finally a very big bullish candle. This overall pattern is a sign of a reversal of market sentiment to the upside side, from bearish to bullish.
4. Piercing Line
This two-candle pattern forms when a bullish candle closes above the midpoint of the previous bearish candle. It shows that bulls are getting stronger and will most probably continue to shove prices upward.
