Welcome to the Bullish Bears advanced candlestick charting course on candlestick reversal patterns! This course is the continuation of our first candlesticks patterns course. Take our Candlesticks Patterns course first before taking this one if you haven’t already. No skipping ahead!
Our first course really goes into the basics of candlesticks patterns, what they mean, what they look like, and how critical candlesticks patterns are when trading. Candlesticks are the first early warning system and most important line of defense when trading. All of the technical indicators on the planet don’t mean a darned thing if you don’t know candlesticks and how to trade them!
Candlesticks patterns tell a very important story between the bulls and the bears. This story forms patterns, and these patterns become critical support and resistance levels. Support and resistance is the absolute name of the game when trading. Buy low and then sell high. Or buy at support and sell at resistance.
So, our first candlesticks course really goes into depth on the most common patterns that traders pay close attention to. This candlestick charting course is going to drill down into the heart of those patterns and find the reversal setups. The two and three candlesticks patterns that give you potential clues on where to enter and exit a trade.
Getting the best possible entries and exits on your trades is extremely important and candlestick reversal patterns are a very helpful guide to knowing when to enter a trade and managing your graceful exit.
CANDLESTICK CHARTING – BOOKS
Before we begin our candlestick charting course, we highly recommend purchasing some very important books on candlesticks patterns. Steve Nison has put together some very helpful books on candlestick charting. Steve’s research has heavily influenced the candlestick charting world and we need to thank him for his pioneering work on the subject.
His first book is a simple read and great to have as a resource guide. Buy The Candlestick Course. Steve Nison is considered the god father of candlesticks charting. Many new and experienced traders believe he is the go to person on the subject. If you’re going to take the time to read any book on candlestick charting, this is the one.
A 2nd Steve Nison book that we recommend is Japanese Candlestick Charting Techniques. Steve discusses how to use candlesticks patterns with technical analysis. This is the follow up book that you should read after reading his Candlestick Course book. Both books together really give you the big picture of candlesticks trading. Buy the Japanese Candlestick Techniques.
CANDLESTICK CHARTING – RESOURCES
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CANDLESTICK CHARTING COURSE
1) SPINNING TOPS
Spinning top candlesticks are reversal candles. They are made up of short real bodies with wicks coming out the top and bottom of the real body. Spinning tops are a part of the doji candlesticks family. This, in turn, means that while they signal a reversal, they are also indecision candles.
The market is a battle of the bulls and the bears hence the formation of the spinning top. Each side had some control that day (or moment) but price ended up closing near where it opened. The smaller the real body of a spinning top, the more limbo the stock was that day.
The candlesticks charting video below will show you several real world examples of spinning top candlesticks on stock charts.
Watch our Spinning Top Candlestick video.
Read our Spinning Top Candlestick post.
2) SHOOTING STARS
Shooting star candlesticks are bearish reversal candles. They usually form at the top of an uptrend. The shooting star has a short real body with little to no lower wick. The upper wick is at least two times the size of the real body. Shooting star candlesticks tell us that buyers had control driving price up, hence the upper wick.
The sellers came in to drive price back down, hence the small real body. This candlestick works best with a confirmation candle. Without one, the reversal doesn’t usually happen. The next candle needs to close under the shooting star.
Watch our Shooting Star Pattern video.
Read our Shooting Star Pattern post.
3) RISING THREE METHODS
The rising three methods candlesticks patterns are actually made up of five candlesticks. It’s a bullish trend continuation pattern. The first candlestick in this pattern is a bullish one. It’s a part of the current trend already in place. Then you have the formation of three small bearish candlesticks. This is a period of consolidation. It’s giving the uptrend a breather.
The last candlestick in the pattern is another bullish one. It should make a new high. That new high tells traders that the bullish trend is still very much in place. Rising three methods can also look like bull flag patterns.
Watch our Rising Three Methods pattern video.
Read our Rising Three Methods post.
4) FALLING THREE METHODS
Falling three methods are the bearish counterpart to the rising three. In fact, it’s also made up of five candlesticks. The first one is keeping with the downtrend in place. Next you get a period of consolidation. This is made up of three small bullish candlesticks in a row. Hence, how it got it’s name.
The last candlestick that forms in the falling three methods is another bearish candle. It needs to make a new low. This alerts traders that the bearish trend is still very much in place for the moment.
Watch our Falling Three Methods pattern video.
Read our Falling Three Methods post.
5) THREE WHITE SOLDIERS
Three white soldiers are a bullish reversal pattern. This pattern is made up of three bullish candlesticks that form what looks like stairs. Price is basically walking up. Each candlestick should open within the real body of the previous day’s candle but close higher. There usually are little to no wicks found in this pattern. In essence, the bulls are staging a complete takeover.
This is a strong reversal pattern as price has steadily climbed for three days. The closer to the end of a downtrend this pattern occurs, the stronger of a reversal it tends to signal.
Watch our Three White Soldiers pattern video.
Read our Three White Soldiers pattern post.
6) THREE BLACK CROWS
Three black crowns are bearish reversal patterns. It’s basically the bearish counter part of three white soldiers candlesticks patterns. It’s made up of three bearish candlesticks. Each day needs to close lower than the previous day while having an open within the real body.
The strength of this pattern is in its formation. The bears take over to drive price down for three consecutive days. The bulls may put in some effort, however, they’re no match for the bears.
Watch our Three Black Crows pattern video.
CANDLESTICK CHARTING – TWEEZERS
7) TWEEZER TOPS PATTERNS
Tweezer top patterns are made up of two candlesticks. This pattern is a pretty precise predictor of reversals. The first candlestick could be made up of a long real body but not necessary. The second candle can be any shape and size. The one thing these two candlesticks need to have in common are equal highs. Sometimes the high of one candle can be a tiny bit higher than the other. However, the more equal the highs are, the better the confirmation.
Tweezer top patterns actually form quite often on stock charts. While typically reversal candlesticks, if they form in a pullback, they can be a part of a continuation pattern. When tweezer tops form at the top of a trend, they end up signaling a reversal.
Watch our Tweezer Top pattern video.
8) TWEEZER BOTTOMS PATTERNS
Tweezer bottom patterns are a reversal pattern seen in a downtrend. The tweezer bottom candlesticks patterns form when price makes two equal lows back to back. Like the tweezer top, this pattern is also made up of two candlesticks. The first candle should be a part of the current downtrend in place. The next candle can take on any shape or form.
While the two candlesticks are different, they need to have one thing in common. They need to form equal lows. The fact that price can’t break equal lows tells you support is strong and price might be changing direction.
Watch our Tweezer Bottom pattern video.
9) DARK CLOUD COVER PATTERNS
Dark cloud cover patterns are bearish reversal patterns found in bullish trends. This pattern is made up of three candlesticks. Dark cloud cover candlesticks patterns are best used on larger time frames such as the daily chart. In fact, this is when it’s most effective. The first candlestick in this pattern is a bullish one in conjunction with the current trend. Next a bearish candlestick forms.
In fact, price on the second day probably gaped up at the open but the bears came and drove price down and erased the gap.
Watch our Dark Cloud Cover pattern video.
10) PIERCING PATTERN CANDLESTICK
Piercing patterns are made up of two candlesticks. The pattern typically forms at the end of a downtrend to reverse price. The first candlestick is a part of the current trend. Then the bulls come in and push price up. In essence, piercing the downtrend to make way for a new uptrend. The second candle opens lower than the first giving the impression that the downtrend is continuing.
Price actually moves up so that the end of the day closes at the midpoint of the first candlestick. The second candle tends to be green in nature because of what it is representing. The bulls stopping a continued fall.
Watch our Piercing Pattern video.
CANDLESTICK CHARTING – ENGULFING
11) BULLISH ENGULFING PATTERNS
Bullish engulfing patterns are bullish reversal patterns made up of two candlesticks. This pattern usually forms at the end of a trend to signify a reversal in price. The first candlestick in this pattern is usually a small bearish one. The second candle that forms is a large bullish one that completely engulfs the first candle. Hence the name of the pattern.
The small bearish candlestick usually doesn’t have a lot of price movement so the wicks are small to nonexistent. This is so the bullish candle can completely take over the bearish candle. Buyers come in and drive price up a lot.
Watch our Bullish Engulfing Pattern video.
12) BEARISH ENGULFING PATTERNS
Bearish engulfing patterns are also two candlestick patterns that signify the end of a bullish trend. The first candlestick in this pattern is a small bullish one. Again the wicks of that candle are small. There wasn’t a lot of price movement. This allows the second candle to come in and completely engulf the first one.
The last candle that makes up this pattern is a large bearish one. It signals that the bulls have run out of momentum and can’t keep driving price higher. This pattern tends to form at the top of a trend.
Watch our Bearish Engulfing Pattern video.
CANDLESTICK CHARTING – HARAMI’S
13) BULLISH HARAMI
Bullish harami patterns are comprised of two candlesticks. The word harami is Japanese for pregnant. Notice the formation of the pattern. It looks like a pregnant woman. The bullish harami’s first candlestick is actually a bearish one. The big bearish candle engulfs the second small bullish candle but on the opposite side of engulfing patterns.
Once the small bullish candle forms inside the big bearish one, it signifies a potential reversal.
Watch our Bullish Harami pattern video.
14) BEARISH HARAMI
Bearish harami patterns signify a reversal to the bearish side. It’s made up of two candlesticks. The first candlestick is a large bullish one. The second candle that forms is a small bearish one. The small second candlestick is completely engulfed inside the first candlestick. The word harami is Japanese for pregnant. In essence, the bullish move is pregnant with a bearish downtrend.
Once a bearish harami forms, it signals traders to get out of long positions and go short.
Watch our Bearish Harami pattern video.
15) BULLISH HOMING PIGEON
Bullish homing pigeon patterns are another two candlestick pattern formation. This pattern is actually made up of bearish candlesticks but have a bullish meaning. The first candlestick in this a long bearish candlestick. The second candle is a small bearish candlestick that is engulfed by the first one, very similar to a bullish harami. It signifies that the bears are losing momentum.
The day after the bullish homing pigeon is a very important day. This gives confirmation of the reversal.
Watch our Bullish Homing Pigeon pattern video.
16) THREE LINE STRIKE
Three line strike patterns are made up of four candlesticks. They’re seen as reversal patterns and are actually hard to find. What differentiates this from the three black crows pattern (bearish) is the fourth candlestick in the pattern.
The fourth and final candle is a confirmation candle. It confirms the reversal of the trend. In other words, the first three candlesticks are strikes while the fourth confirms the reversal.
Watch our Three Line Strike pattern video.
CANDLESTICK CHARTING – STAR PATTERNS
17) MORNING STAR PATTERNS
Morning star patterns are bullish reversal patterns made up of three candlesticks. At first glance, it may not seem like a bullish reversal pattern. The first two candlesticks that form are bearish in nature. The first candle is usually a large bearish candle in keeping with the trend. The second candle that forms is a smaller bearish one, usually in the doji candlesticks family. This signals indecision.
The last candlestick in this pattern is a larger bullish one. The bulls are coming in to take over. A new direction is formed.
Watch our Morning Star Pattern video.
18) EVENING STAR PATTERNS
Evening star patterns are a top reversal pattern used by traders. It’s made up of three candlesticks and is bearish in nature. The first candlestick that forms is a large bullish one in keeping with the current trend. The second candle can be bullish or bearish but is usually in the doji family. It signals indecision.
The third candlestick is a bearish one. This candle should open near the middle of the second candlestick and close near the middle of the first candle. The bears now have control.
Watch our Evening Star Pattern video.
CANDLESTICK CHARTING – THE THREES
19) THREE INSIDE UP
Three inside up patterns are bullish reversal patterns containing three candlesticks. In fact, the first two candlesticks of this pattern are actually another a part of another bullish reversal pattern, the bullish harami. The first candlestick is a large bearish one. The second candle is a small bullish one formed inside of the first candle.
What differentiates this pattern from a bullish harami is the formation of the third candlestick. This candlestick is a bullish one. It gives confirmation to the reversal. Traders tend to trust this pattern because they get confirmation of the new trend.
Watch our Three Inside Up Pattern video.
20) THREE INSIDE DOWN
Three inside down patterns are made up of three candlesticks that inform traders of a bearish reversal. Again, this pattern houses a second pattern. The first candlestick is a bullish one and a part of the current trend. The next candlestick that forms is a small bearish one. In this case, the formation of a bearish harami. Then you get the formation of the third candlestick.
The third candlestick is a bearish candle. It confirms the bearish harami pattern. Three inside down patterns have that extra confirmation candle that gives traders peace of mind about the reversal.
Watch our Three Inside Down Pattern video.
21) THREE OUTSIDE UP
Three outside up patterns are three candlestick patterns that inform traders of a bullish reversal. The first candlestick is bearish in keeping with the current trend. The real body should be small. The second candlestick is a large bullish one. This candle completely engulfs the first candle. In fact, this is a bullish engulfing pattern.
Lastly, the third candle that forms is a second bullish candle. This candlestick is confirmation of the bullish engulfing pattern as well as the formation of a second pattern. It makes the reversal stronger with the formation of a confirmation candlestick.
Watch our Three Outside Up Pattern video.
22) THREE OUTSIDE DOWN
Three outside down patterns are made up of three candlesticks that signify a bearish reversal. In fact, the first two candlesticks form a different reversal pattern known as a bearish engulfing pattern. The first candlestick that forms is a small bullish candle that’s a part of the current trend. The second candlestick is a large bearish candle that completely engulfs the first one. Hence, the bearish engulfing pattern.
The last candle that forms is another bearish candlestick. It’s confirmation of a new trend as well as giving strength to the three outside down pattern.
Watch our Three Outside Down Pattern video.
HOW TO TRADE CANDLESTICK REVERSAL PATTERNS
We have step by step tutorial videos on how to draw trend lines on both rising bottoms and descending tops, as well as where to enter the trade and place your stop loss for all of the candlestick reversal patterns in this course under our “members only videos” section. If you’d like to know how to trade all of the candlestick reversal patterns in this course then make sure to Subscribe For Only $10 Bucks Per Month!
We hope that you enjoyed our candlestick reversal patterns course. Make sure to take our other free stock market courses.
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