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Bullish Candlestick Reversal Patterns

Pattern

Description

Sept 6

Jan 25

Mar 4

Belt Hold

The market is trending when a significant gap in the direction of trend occurs on the open. From that point, the market never looks back: all further price action that day is the opposite of the previous trend. This causes much concern and many positions will be covered or sold, which will help accentuate the reversal.

SMRT
 

ORCC
 

Hammer

The market has been in a downtrend, so there is an air of bearishness. The market opens and then sells off sharply. However, the sell-off is abated and the market returns to, or near, its high for the day. The failure of the market to continue the selling reduces the bearish sentiment, and most traders will be uneasy with any bearish positions they might have. If the close is above the open, causing a white body, the situation is even better for the bulls. Confirmation would be a higher open with yet a still higher close on the next trading day.

ADSX
CSGS
IPCC
UMBF
 

ISPH
 

BIDZ
CODI
HSTX
VRTX
 

Harami

A downtrend has been in place for some time. A long black day with average volume has occurred which helps to perpetuate the bearishness. The next day, prices open higher, which shocks many complacent bears, and many shorts are quickly covered, causing the price to rise further. The price rise is tempered by the usual late comers seeing this as an opportunity to short the trend they missed the first time. Volume on this day has exceeded the previous day, which suggests strong short covering. A confirmation of the reversal on the third day would provide the needed proof that the trend has reversed.

Harami Cross

The Harami Cross starts out the same as that for the basic Harami pattern. A trend has been in place when, all of a sudden, the market gyrates throughout a day without exceeding the body range of the previous day. What is worse, the market closes at the same price as it opened. Volume of this a Doji day also dries up, reflecting the complete lack of decision of traders. A significant reversal of trend has occurred.

RAME
 

Morning Doji Star

The psychology behind this pattern is similar to that of the Morning star, except that the Doji Star is more of a shock to the previous trend and, therefore, more significant.

Morning Star

A downtrend has been in place which is assisted by a long black candlestick. There is little doubt about the downtrend continuing with this type of action. The next day prices gap lower on the open, trade within a small range and close near their open. This small body shows the beginning of indecision. The next day prices gap higher on the open and then close much higher. A significant reversal of trend has occurred.

Piercing Line

A long black body forms in a downtrend which maintains the bearishness. A gap to the downside on the next days open further perpetuates the bearishness. However, on the day after, the market rallies all day and closes much higher. In fact the close is above the midpoint of the body of the long black day. This action causes concern to the bears and a potential bottom has been made. Candlestick charting shows this action quite well, where standard bar charting would hardly discern it.

ARQL
AUDC
CKXE
DIVX
HHGP
IMMU
TSTR
 

The Engulfing

A downtrend is in place when a small black body day occurs with not much volume. The next day, prices open at new lows and then climb to a new two day high. The rise is sustained by high volume and finally closes above the open of the previous day. Emotionally, the downtrend has been damaged. If the next (third) days prices remain higher, a major reversal of the uptrend has occurred.

APPY
BWTR
CHRT
CRMT
EURX
 

CCIX
 

Three Outside Up

The Bullish Three Outside Up is a confirmation pattern for the Bullish Engulfing. Its pattern is defined by the first two days of the three day pattern forming a Bullish Engulfing, and the third day giving support to the suggested reversal of the Engulfing, by being a white candle closing with a new high for the three days.

SPAR
 

SGMO
 

Three White Soldiers

The Three White Soldiers pattern occurs in a downtrend and is representative of a strong reversal in the market. Each day opens lower but then closes to a new short term high. This type of price action is very bullish and should never be ignored.

MEAS
MLNX
TTPY
 

TriStar Bullish

The market has probably been in a downtrend for a long time. With the trend starting to show weakness, bodies probably are becoming smaller. The first Doji would cause considerable concern. The second Doji would indicate that there was no direction left in the market. Finally, the third Doji would put the last nail in the coffin of the trend. This is essentially because this pattern indicates too much indecision, and everyone with any conviction would be reversing positions

Mat Hold Bullish

The market is continuing its rise, with a long white day confirming the bullish action. The next day prices gap open and trade in a small range, only to close slightly lower. This lower close (lower than the open) is still a new closing high for the move. The bulls have only rested, even though the price action surely brings out the bears. The next couple of days cause some concern that the upward move may be in jeopardy. These days open about where the market closed on the previous day and then close slightly lower. Even by the third such day, the market is still higher than the open of the first day (a long white day). An attitude that a reversal has failed develops and prices rise again to close at a new closing high. This fully supports the bulls' case that this was just a pause in a strong upward trend.

Unique Three River Bottom

A falling market produces a long black day. The next day opens higher, but the bearish strength causes a new low to be set. A substantial rally ensues in which the strength of the bears is in question. This indecision and lack of stability is enforced when the third day opens lower. Stability arrives with a small white body on the third day. If, on the fourth day, price rises to new highs, a reversal of trend has been confirmed.