EVERY CANDLESTICK YOU SEE ON YOUR CHART REPRESENT PRICE MOVEMENT IN THE SPECIFIED TIME FRAME. EVERY CANDLESTICK IS A STORY, AN AFTERMATH OF PRICE HAPPENING.
Bullish Reversal Candlestick Patterns indicate that the ongoing downtrend is going to end and it may reverse to an uptrend.
The Bullish Candlestick Pattern can be single or multiple candlestick patterns.
One should note that:
Bullish reversal patterns should form at the end of a downtrend otherwise it will act just like a continuation pattern.
One should confirm the reversal signals gives by bullish reversal patterns with other indicators such as high trading volume.
1. Hammer:
Hammer is a bullish reversal candlestick pattern that occurs at the bottom of a downtrend.
This bullish candlestick pattern is formed when the open and low prices are almost the same. This pattern should consist of a lower shadow which is twice as long as the real body.
When identifying this pattern when should remember that the prior trend is a downtrend.
This pattern is formed when the real body is small along with a long lower shadow which shows that bears were trying to push down the prices but they were unable to do so.
A bullish candlestick should be formed after the Hammer which confirms that the bullish reversal has taken place.
Below is the daily chart of Nifty 50 in which all the above 3 points are demonstrated:
2. The Piercing Pattern:
A piercing pattern is a candlestick pattern that gives us potential bullish reversal signs and it is formed near the support levels at the end of a downtrend.
This pattern is made of two candlesticks, the first one is a bearish candlestick and the second one is a bullish candlestick.
The bearish candlestick should have a large real body and the second bullish candlestick should be below the low of the previous candlestick and should close above the middle of the real body of the first candlestick.
Below is an example of the piercing pattern in the daily chart of Sunpharma Industries Ltd.
3. Bullish Engulfing:
The bullish engulfing candlestick pattern indicates bullish reversal which shows a rise in the buying pressure.
This pattern indicates a reversal from downtrend as more buyers enter the market and move the prices up after a long downtrend,
The pattern consists of two candles with the second green candle completely engulfing the ‘body’ of the previous red candle.
One should remember when trading with a Bullish engulfing pattern the prior trend should be a downtrend.
Also, don’t forget to confirm the reversal signals given by this pattern with other technical indicators as we have to use the Relative Strength Index in our below example.
4. The Morning Star:
The morning Star is a triple bullish candlestick pattern which indicates a bullish reversal.
As it is formed at the end of a downtrend it gives us a warning sign that the downtrend is going to reverse to an uptrend.
It consists of three candles; a bearish candlestick, the second one can be either bullish or bearish with a small body, and the third candlestick is a bullish candle.
One should remember when trading with the Morning Star pattern the prior trend should be a downtrend.
For confirming the reversal signals given by this pattern traders can use other technical indicators as we have to use Relative Strength Index in our below example.
5. The Three White Soldiers:
The three white soldiers pattern is a bullish candlestick pattern occurring at the end of a downtrend and indicating a bullish reversal.
This pattern consists of three long bullish candlesticks which are green in color and do not have long shadows.
This bullish candlestick pattern signals uptrend reversal because of the strong buying pressure by the buyers.
All the three candlesticks and open within the real body of the previous candle in the pattern.
Below is an example of a daily chart of USD/INR that shows us how Three Soldiers Candlesticks is formed after a downtrend:
Summary:
Hammer is a bullish candlestick pattern that is formed when the open and low prices are almost the same.
A piercing pattern is a candlestick pattern that gives us potential bullish reversal signs and it is formed near the support levels at the end of a downtrend.
The bullish engulfing candlestick pattern indicates bullish reversal which shows a rise in the buying pressure.
The morning star consists of three candles; a bearish candlestick, the second one can be either bullish or bearish with a small body, and the third candlestick is a bullish candle.
The three white soldiers pattern is a bullish candlestick pattern occurring at the end of a downtrend and indicating a bullish reversal.
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