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francescaauthorA Comprehensive List of Candlestick Patterns and Their Meanings
Candlestick patterns are visual representations of the price action on a stock chart. They are used by traders and investors to make decisions about market trends, support and resistance levels, and potential entry and exit points. There are several different candlestick patterns, each with its own unique meaning and potential trading implications. In this article, we will provide a list of the most common candlestick patterns and their meanings, along with an explanation of how to interpret them.
1. The Bullish Incoming Line (BL)
This pattern occurs at the end of a downward trend when a stock's price reverses direction and moves higher. The bullish incoming line is formed when the opening price of the next trading session is higher than the closing price of the previous session, creating a horizontal line above the previous closing candlestick. This pattern indicates that the market is becoming more optimistic and is potentially a sign of a trend reversal.
2. The Bearish Outgoing Line (OL)
This pattern occurs at the end of an upward trend when a stock's price reverses direction and moves lower. The bearish outgoing line is formed when the opening price of the next trading session is lower than the closing price of the previous session, creating a horizontal line below the previous closing candlestick. This pattern indicates that the market is becoming more pessimistic and is potentially a sign of a trend reversal.
3. The Bullish Dark Swan (DS)
This pattern occurs at the end of a downward trend when a stock's price reverses direction and moves higher. The bullish dark swan is formed when the closing price of the previous session is higher than the opening price of the next trading session, but the closing price is also lower than the previous closing candlestick. This pattern indicates that the market is becoming more optimistic, but there may still be some remaining uncertainty or resistance to the new trend.
4. The Bearish Light Swan (LS)
This pattern occurs at the end of an upward trend when a stock's price reverses direction and moves lower. The bearish light swan is formed when the closing price of the previous session is lower than the opening price of the next trading session, but the closing price is also higher than the previous closing candlestick. This pattern indicates that the market is becoming more pessimistic, but there may still be some remaining optimism or support for the old trend.
5. The Bullish Half Patch (HP)
This pattern occurs when a stock's price moves higher in the morning and then consolidates for a period before moving even higher in the afternoon. The bullish half patch is formed when the opening price of the next trading session is higher than the closing price of the previous session, but the price does not close at the daily high. This pattern indicates that there is some strong support for the upward trend, and it may continue to move higher.
6. The Bearish Half Patch (HP)
This pattern occurs when a stock's price moves lower in the morning and then consolidates for a period before moving even lower in the afternoon. The bearish half patch is formed when the opening price of the next trading session is lower than the closing price of the previous session, but the price does not close at the daily low. This pattern indicates that there is some strong resistance to the downward trend, and it may begin to reverse direction.
7. The Bullish Four-Point Patch (4PP)
This pattern occurs when a stock's price moves higher in the morning, declines in the afternoon, moves higher again in the evening, and then declines again in the morning of the following trading session. The bullish four-point patch is formed when the opening price of the next trading session is higher than the closing price of the previous session, but the price does not close at the daily high. This pattern indicates that there is strong support for the upward trend, and it may continue to move higher.
8. The Bearish Three-Point Patch (3PP)
This pattern occurs when a stock's price moves lower in the morning, rises in the afternoon, and then moves lower again in the morning of the following trading session. The bearish three-point patch is formed when the opening price of the next trading session is lower than the closing price of the previous session, but the price does not close at the daily low. This pattern indicates that there is strong resistance to the downward trend, and it may begin to reverse direction.
9. The Bullish Penetration Pattern (BP)
This pattern occurs when a stock's price penetrates above a previously formed resistance level, indicating that the market is becoming more optimistic and is potentially a sign of a trend reversal. The penetration pattern is formed when the closing price of the previous session is higher than the opening price of the next trading session, and the price closes above the previously formed resistance level.
10. The Bearish Penetration Pattern (BP)
This pattern occurs when a stock's price penetrates below a previously formed support level, indicating that the market is becoming more pessimistic and is potentially a sign of a trend reversal. The penetration pattern is formed when the closing price of the previous session is lower than the opening price of the next trading session, and the price closes below the previously formed support level.
Candlestick patterns are a valuable tool for traders and investors to use in making decisions about market trends and potential entry and exit points. By understanding and recognizing these patterns, one can gain a better understanding of the market's momentum and potential directional changes. However, it is important to consider these patterns in conjunction with other technical and fundamental analysis, as well as risk management strategies, when making investment decisions.