CANDLESTICK SIGNALS

1.The Doji

Criteria:

•  The open and the close are the same or nearly the same.
•  The length of the shadow should not be excessively long, especially when viewed at the end of a bullish trend.

Signal Enhancements:

1. A gap away from the previous day’s close sets up for a stronger reversal move.
2. Large volume on the signal day increases the chances that a blowoff day has occurred, although it is not a necessity.
3. It is more effective after a long candle body, usually an exaggerated daily move compared to the normal daily trading range seen in the majority of the trend.

https://www.youtube.com/watch?v=YWMcGyD2a4I&t=1s

2. Bullish Engulfing

                     

Criteria:

• The body of the second day completely engulfs the body of the first day. Shadows are not a consideration.
•  Prices have been in a definable uptrend, even if it has been short term.
• The body of the second candle is the opposite color of the first candle,the first candle being the color of the previous trend. The exception to this rule is when the engulfed body is a Doji or an extremely small body.

Signal Enhancements:

1. A large body engulfing a small body. The previous day was showing that the trend was running out of steam. The large body shows that the new direction has started with good force.
2. When the Engulfing Pattern occurs after a fast move down, there will be less supply of stock to slow down the reversal move. A fast move makes a stock price over-extended and increases the potential for profit taking.
3. Large volume on the engulfing day increases the chances that a blowoff day has occurred.
4. The engulfing body engulfing more than one previous body demonstrates power in the reversal.
5. If the engulfing body engulfs the body and the shadows of the previous day, the reversal has a greater probability of working.
6. The greater the open gaps down from the previous close, the greater the probability of a strong reversal.

3. Bearish Engulfing

Criteria:

• The body of the second day completely engulfs the body of the first day.Shadows are not a consideration.
• Prices have been in a definable uptrend, even if it has been short term.
• The body of the second candle is the opposite color of the first candle,the first candle being the color of the previous trend. The exception to this rule is when the engulfed body is a Doji or an extremely small body.

Signal Enhancements:

1. A large body engulfing a small body. The previous day was showing that the trend was running out of steam. The large body shows that the new trend was running out of steam. The large body shows that the new.
2. When the Engulfing Pattern occurs after a fast spike up, there will be less supply of stock to slow down the reversal move. A fast move makes a stock price over-extended and increases the potential for profit taking and a meaningful pullback.
3. Large volume on the engulfing day increases the chances that a blowoff day has occurred.
4. The engulfing body engulfing more than one previous body demonstrates power in the reversal.
5. If the engulfing body engulfs the body and the shadows of the previous day, the reversal has a greater probability of working.
6. The greater the open gaps up from the previous close, the greater the probability of a strong reversal.

https://www.youtube.com/watch?v=KkKanyv_VOQ&t=192s

4. Hammer

                        

Criteria:

•  The lower shadow should be at least two times the length of the body.
•  The real body is at the upper end of the trading range. The color of the body is not important although a white body should have slightly more bullish implications.
• There should be no upper shadow or a very small upper shadow.
•  The following day needs to confirm the Hammer signal with a strong bullish day.

Signal Enhancements:

1. The longer the lower shadow, the higher the potential of a reversal occurring.
2. A gap down from the previous day’s close sets up for a stronger reversal move provided the day after the Hammer signal opens higher.
3. Large volume on the Hammer day increases the chances that a blowoff day has occurred.

5. Hanging Man

         

Criteria:

• The upper shadow should be at least two times the length of the body.
•  The real body is at the upper end of the trading range. The color of the body is not important although a black body should have slightly more bearish implications.
• There should be no upper shadow or a very small upper shadow.
• The following day needs to confirm the Hanging Man signal with a blackcandle or, better yet, a gap down with a lower close.

Signal Enhancements:

1. The longer the lower shadow, the higher the potential of a reversal occurring.
2. A gap up from the previous day’s close sets up for a stronger reversal move provided the day after the Hanging Man signal trades lower.
3. Large volume on the signal day increases the chances that a blowoff day has occurred, although it is not a necessity.

6. Piercing Candle

                      

Criteria:

• The body of the first candle is black; the body of the second candle is white.
• The downtrend has been evident for a good period. A long black candle occurs at the end of the trend.
• The second day opens lower than the trading of the prior day.
• The white candle closes more than halfway up the black candle.

Signal Enhancements:

1. The longer the black candle and the white candle, the more forceful the reversal.
2. The greater the gap down from the previous day’s close, the more pronounced the reversal.
3. The higher the white candle closes into the black candle, the stronger the reversal.
4. Large volume during these two trading days is a significant confirmation.

7.Dark Cloud Cover

                         

Criteria:

•  The body of the first candle is white; the body of the second candle is black.
• The uptrend has been evident for a good period. A long white candle occurs at the top of the trend.
• The second day opens higher than the trading of the prior day.
• The black candle closes more than halfway down the white candle.

Signal Enhancements:

1. The longer the white candle and the black candle, the more forceful the reversal.
2. The higher the gap up from the previous day’s close, the more pronounced the reversal.
3. The lower the black candle closes into the white candle, the stronger the reversal.
4. Large volume during these two trading days is a significant confirmation.

8. Bullish Harami

                    

Criteria:

• The body of the first candle is black; the body of the second candle is white.
• The downtrend has been evident for a good period. A long black candle occurs at the end of the trend.
• The second day opens higher than the close of the previous day and closes lower than the open of the prior day.
• Unlike the Western Inside Day, just the body needs to remain in the previous day’s body, whereas the Inside Day requires both the body and the shadows to remain inside the previous day’s body.
• For a reversal signal, further confirmation is required to indicate that the trend is now moving up.

Signal Enhancements:

1. The longer the black candle and the white candle, the more forceful the reversal.
2. The higher the white candle closes up on the black candle, the more convincing the signal that a reversal has occurred despite the size of the white candle.

9. Bearish Harami

                     

Criteria:

• The body of the first candle is white; the body of the second candle is black.
• The uptrend has been apparent. A long white candle occurs at the end of the trend.
• The second day opens lower than the close of the previous day and closes higher than the open of the prior day.
• For a reversal signal, confirmation is needed. The next day should show weakness.

Signal Enhancements:

1. The longer the white candle and the black candle, the more forceful the reversal.
2. The lower the black candle closes down on the white candle, the more convincing that a reversal has occurred, despite the size of the black candle.

10.Morning Star

 

Criteria:

• The downtrend has been apparent.
• The body of the first candle is black, continuing the current trend. The second candle is an indecision formation.
• The third day shows evidence that the bulls have stepped in. That candle should close at least halfway up the black candle.

Signal Enhancements:

1. The longer the black candle and the white candle, the more forceful the reversal.
2. The more indecision that the star day illustrates, the better probabilities that a reversal will occur.
3. A gap between the first day and the second day adds to the probability that a reversal is occurring.
4. A gap before and after the star day is even more desirable.
5. The magnitude, that the third day comes up into the black candle of the first day, indicates the strength of the reversal.

11.Evening Star

                    

Criteria:

• The uptrend has been apparent.
• The body of the first candle is white, continuing the current trend. The second candle is an indecision formation.
• The third day shows evidence that the bears have stepped in. That candle should close at least halfway down the white candle.

Signal Enhancements:

1. The longer the white candle and the black candle, the more forceful the reversal.
2. The more indecision that the star day illustrates, the better probabilities that a reversal will occur.
3. A gap between the first day and the second day adds to the probability that a reversal is occurring.
4. A gap before and after the star day is even more desirable. The magnitude, that the third day comes down into the white candle of the first day, indicates the strength of the reversal.

12. Kicker

      

Criteria:

• The first day’s open and the second day’s open are the same. The price movement is in opposite directions from the opening price.
• The trend has no relevance in a kicker situation.
• The signal is usually formed by surprise news before or after market hours.
• The price never retraces into the previous day’s trading range.

Signal Enhancements:

1. The longer the candles, the more dramatic the price reversal.
2. Opening from yesterday’s close to yesterday’s open already is a gap. However, gapping away from the previous day’s open further enhances the reversal.

13. Shooting Star

                   

Criteria:

• The upper shadow should be at least two times the length of the body.
• The real body is at the lower end of the trading range. The color of the body is not important although a black body should have slightly more bearish implications.
• There should be no lower shadow or a small lower shadow.
• The following day needs to confirm the Shooting Star signal with a black candle or, better yet, a gap down with a lower close.

Signal Enhancements:

1. The longer the upper shadow, the higher the potential of a reversal occurring.
2. A gap up from the previous day’s close sets up for a stronger reversal move.
3. The day after the Shooting Star signal opens lower.
4. Large volume on the Shooting Star day increases the chances that a blowoff day has occurred, although it is not a necessity.

14. Inverted Hammers

              

Criteria:

• The upper shadow should be at least two times the length of the body.
• 2. The real body is at the lower end of the trading range. The color of the body is not important, although a white body should have slightly more bullish implications.
• There should be no lower shadow or a very small lower shadow.
• The following day needs to confirm the Inverted Hammer signal with a strong bullish day.

Signal Enhancements:

1. The longer the upper shadow, the higher the potential of a reversal occurring.
2. A gap down from the previous day’s close sets up for a stronger reversal move provided.
3. The day after the hammer signal opens higher.
4. Large volume on the Reverse Hammer day increases the chances that a blowoff day has occurred.

https://www.youtube.com/watch?v=q2BvvyL0z8c

15. Tri Star

Criteria:

• All three days are Dojis.
• The middle day gaps above or below the first and third day. The length of the shadow should not be excessively long, especially when viewed at the end of a bullish trend.

Signal Enhancements:

1. The greater the gap, away from the previous day’s close, the more it sets  up for a stronger reversal move.
2. Large volume on one of the signal days increases the chances that a significant reversal is taking place.

16. Three Black Crows

                  

Criteria:

• Three long black bodies occur, all of nearly equal length.
• The prior trend should have been up.
• Each day opens within the body of the previous day.
•  Each day closes near its low.

17. Two Crow

                     

Criteria:

• A long white candle continues the uptrend.
• The real body of the next day is black while gapping up and not filling the gap.
• The third day opens within the second day’s body and closes within the white candle’s body. This produces a black candle that fills in the gap.

Signal Enhancements:

1. If the third day was to close more than halfway down the white candle, it would form an Evening Star pattern.

18. UpSide Gap Two Crows

Criteria:

• A long white candle continues the uptrend.
• The real body of the next day is black while gapping up and not filling the gap.
• The third day opens higher than the second day’s open and closes below the second day’s close. This produces a black candle that completely engulfs the small black candle.
• The close of the third day is still above the close of the last white candle.

Signal Enhancements:

1. If the third day were to close within the white candle, it would become Two Crows.

19. Counterattack Lines

             

Criteria:

1. The first Candlestick body should continue the prevailing trend.
2. The second Candlestick gaps open continuing the trend.
3. The real body of the second day closes at the close of the first day.
4. The body of the second day is the opposite color of the first day’s.
5. Both days should be long candle days.

Signal Enhancements:

1. The longer the bodies, the more significant the reversal pattern.

20. Belt Hold

          

Criteria:

• The Candlestick body should be the opposite color of the prevailing trend.
• It significantly gaps open, continuing the trend.
• The real body of the Candlestick has no shadow at the open end. The open is the high or low of that trend.
• The length of the body should be a long body. The greater the length,the more significant the reversal signal.

Signal Enhancements:

1. The longer the body, the more significant the reversal pattern.

21. Unique Three River Bottom

                 Criteria:

• The Candlestick body of the first day is a long black candle, consistent with the prevailing trend.
• The second day does a Harami/Hammer. It also has a black body.
• The second day’s shadow has set a new low.
• The third day opens lower, but not below the lowest point of the previous day. It closes higher but below yesterday’s close.

Signal Enhancements:

1. The longer the shadow of the second day, the probability of a successful reversal becomes greater.

 

22. Breakaways

 Criteria:

• The first day is a long-body day and has the color of the existing trend.
• The second day gaps away from the previous close. It has the same color as the first day candle.
• Days three and four have closes that continue the trend.
• The last day is an opposite-color day that closes in the gap area between day one and day two.

23. Three Inside Up & Three Inside Down                            

Criteria:

• The Harami pattern is the overriding signal component of this pattern.
• The harami body should be the opposite color of the long candle day.
• Day three has a close that is higher than the open of day one. Or lower than day one in the bearish indicator.

24. Three Stars In The South

               

Criteria:

• The first black candle day has a lower shadow that indicates buying stepping in—almost a Hammer but not quite.
• The second day is like the first but on a smaller scale.
• Day three should be a Marubozu with no shadows. It is within the previous day’s trading range.

25. Three White Soldiers

Criteria:

• Each consecutive long candle closes with a higher close.
• The second and third Candlesticks open in the previous day’s body.
• The opens should be within the top half of the previous day’s body.

26. Advance Block

            

Criteria:

• Each white candle occurs with higher closes.
• The opens occur in the previous day’s body.
• The bodies are getting smaller, and/or the upper shadows are getting longer.

27. Deliberation

Criteria:

• The first two white candles are relatively equal long candles.
• The third day is a small body.
• The small body opened at or very near the previous day’s close. Or it may have gapped up slightly.

28. Concealing Baby Swallow

 Criteria:

• Two large Black Marubozus make up the beginning of this pattern.
• The third day is a Reverse Hammer formation. It gaps down from the previous day’s close.
• The final day completely engulfs the third day, including the shadow.

29. Stick Sandwich

         

Criteria:

• A downtrend is concluded with a large black candle followed by a white candle. The white candle opens above the black candle close and closes above the black candle’s open.
• The final day completely engulfs the white candle and closes at the same level as the previous black candle.

30. Homing Pigeon

   Criteria:

• The body of the first candle is black; the body of the second candle is black.
• The downtrend has been evident for a good period. A long black candle occurs at the end of the trend.
• The second day opens higher than the close of the previous day and closes lower than the open but above the closing price of the prior day.
• Unlike the Western Inside Day, just the body needs to remain in the previous day’s body, whereas the Inside Day requires both the body and the shadows to remain inside the previous day’s body.
• For a reversal signal, further confirmation is required to indicate that the trend is moving up.

Signal Enhancements:

1. The higher the second candle closes up on the first black candle, the more convincing it is that a reversal has occurred.

31. Ladder Bottom

             

Criteria:

• Like the Three Black Crows pattern, the beginning of the signal has three black candle days, each with lower opens and closes of the previous day.
• The fourth day resembles a reverse hammer, opening, then trading up during the day before closing on its low.
• The final day opens above the open of the previous day open, a gap up and upward continuation for the rest the day, a Kicker-type pattern. It finally closes above the trading range of the previous three days.

32. Matching Low

Criteria:

• The body of the first candle is black; the body of the second candle is black.
• The downtrend has been evident for a good period. A long black candle occurs at the end of the trend.
• The second day opens higher than the close of the previous day and closes at the same close as the prior day.
• For a reversal signal, further confirmation is required to indicate that the trend is moving up.

33. Upside Tasuki Gap

Criteria:

• An uptrend is in progress. A gap occurs between two candles of the same color.
• The color of the first two candles is the same as the prevailing trend.
• The third day, an opposite color candlestick opens within the previous candle and closes below the previous open.
• The third day close does not fill the gap between the two white candles.
• The last two candles, opposite colors, are usually about the same size.

34. Downside Tasuki Gap

Criteria:

• A downtrend is in progress. A gap occurs between two candles of the same color.
• The color of the first two candles is the same as the prevailing trend.
• The third day, an opposite color Candlestick opens within the previous candle and closes below the previous open.
• The third day close does not fill the gap between the two black candles.
• The last two candles, opposite colors, are usually about the same size.

35. On Neck Line 

             

Criteria:

•  A long black candle forms in a downtrend.
• The next day gaps down from the previous day’s close; however, the body is usually smaller than one seen in the Meeting Line pattern.
• The second day closes at the low of the previous day.

36. In Neck Line 

Criteria:

• A long black candle forms in a downtrend.
• The next day gaps down from the previous day’s close; however, the body is usually smaller than one seen in the Meeting Line pattern.
• The second day closes at the close or just slightly above the close of the previous day.

37. Thrusting

Criteria:

• A long black candle forms in a downtrend.
• The next day gaps down from the previous day’s close; however, the body is usually bigger than the ones found in the On Neck and In Neck patterns.
• The second day closes just slightly below the midpoint of the previous day’s candle.

38. Rising Three Method

Criteria:

• An uptrend is in progress. A long white candle forms.
• A group of small-bodied candles follow, preferably black bodies.
• The close of any of the pullback days does not close lower than the open of the big white candle.
• The final day opens up into the body of the last pullback day and proceeds to close above the close of the first big white candle day.

39. Falling Three Method

                   

Criteria:

• A downtrend is in progress. A long black candle forms.
• A group of small-bodied candles follows, preferably white bodied.
• The close of any of the uptrend days does not close higher than the open of the big white candle.
• The final day opens up into the body of the last uptrend day and proceeds to close below the close of the first big black candle day.

40. Side By Side white Lines

                                          

Criteria:

• An uptrend is in progress. A gap occurs between two candles of the same color.
• The color of the first two candles is the same as the prevailing trend.
• The third day, a candle opens at the same or near the open price of the previous day.
• The third day closes near the close of the previous day.

41. Separating Lines

Criteria:

• An uptrend is in progress. Then a day occurs that is the opposite color of the current trend.
• The second day opens at the open of the previous day.
• The second day should open on its low for the day and proceed higher.

             

42. Mat Hold

Criteria:

• An uptrend is in progress. A long white candle forms.
• A gap up day that closes lower than its open creates a small black candle.
• The next two days form small candles somewhat like the Rising Three Method.
• The final day gaps up and closes above the trading ranges of the previous four days.

43. Three Line Strike

         

Criteria:

• Three White Soldiers, three white candles, are continuing an uptrend.
•  The fourth day opens higher, but then pulls back to close below the open of the first white candle.

Refered from book  Candlestick Trading