Bullish High Reliability Reversal Candle Patterns
1. BULLISH PIERCING LINE
Type:
Reversal
Relevance:
Bullish
Prior
Trend: Bearish
Reliability:
High
Definition:
Bullish
Piercing Line Pattern is a bottom reversal pattern. A long black candlestick is
followed by a gap lower during the next day while the market is in downtrend.
The day ends up as a strong white candlestick, which closes more than halfway
into the prior black candlestick’s real body.
Recognition Criteria:
1. Market is characterized by downtrends.
2. We see a long black candlestick.
3. Then we see a long white candlestick whose opening price is below previous
day’s low on the second day.
4. The second day’s close is contained within the first day body and it is also
above the midpoint of the first day’s body.
5. The second day however fails to close above the body of the first day.
Explanation:
The
market moves down in a downtrend. The first black real body reinforces this
view. The next day the market opens lower via a gap. Everything now goes, as
bears want it. However suddenly the market surges toward the close, leading the
prices to close sharply above the previous day close. Now the bears are losing
their confidence and reevaluating their short positions. The potential buyers
start thinking that new lows may not hold and perhaps it is time to take long
positions.
Important
Factors:
In
the Bullish Piercing Pattern, the greater the degree of penetration into the
black real body, the more likely it will be a bottom reversal. An ideal
piercing pattern will have a real white body that pushes more than half way
into the prior session’s black real body.
A
confirmation of the trend reversal by a white candlestick, a large gap up or by
a higher close on the next trading day is suggested.
2. BULLISH KICKING PATTERN
Type:
Reversal
Relevance:
Bullish
Prior
Trend: N/A
Reliability:
High
Confirmation:
Needed
Definition:
The
Bullish Kicking Pattern is a White Marubozu following a Black Marubozu. After
the Black Marubozu, market gaps sharply higher on the opening and it opens with
a gap above the prior session’s opening thus forming a White Marubozu.
Recognition Criteria:
1.
Market direction is not important.
2. We first see a Black Marubozu pattern.
3. Then we see a White Marubozu that gaps upward on the second day.
2. We first see a Black Marubozu pattern.
3. Then we see a White Marubozu that gaps upward on the second day.
Explanation:
This
Bullish Kicking Pattern is a strong sign showing that the market is headed
upward. The previous market direction is not important for this pattern unlike
most other candle patterns. The market is headed up with the Bullish Kicking
Pattern as the prices gap up the next day. The prices never enter into the
previous day's range. Instead they close with another gap.
Important
Factors:
We
should be careful that both of the patterns do not have any shadows or they
have only very small shadows (they both are Marubozu).
The
Bullish Kicking Pattern is somewhat similar to the Bullish Separating Lines
Pattern. The opening prices are equal in Bullish Separating Lines Pattern while
in the Bullish Kicking Pattern a gap occurs.
The
Bullish Kicking Pattern is highly reliable, but still, a confirmation of the
reversal on the third day should be sought. This confirmation may be in the
form of a white candlestick, a large gap up or a higher close on the third day.
3. BULLISH ABANDONED BABY
Type:
Reversal
Relevance: Bullish
Prior Trend: Bearish
Reliability: High
Confirmation: Suggested
Definition:
The
Bullish Abandoned Baby Pattern is a very rare bottom reversal signal. It is
composed of a Doji Star, which gaps away (including shadows) from the prior and
following days’ candlesticks.
Recognition Criteria:
1.
Market is characterized by downtrend.
2. We usually see a long black candlestick in the first day.
3. Then a Doji appears on the second day whose shadows gap below the previous day's lower shadow and gaps in the direction of the previous downtrend.
4. Then we see a white candlestick on the third day with a gap in the opposite direction with no overlapping shadows.
2. We usually see a long black candlestick in the first day.
3. Then a Doji appears on the second day whose shadows gap below the previous day's lower shadow and gaps in the direction of the previous downtrend.
4. Then we see a white candlestick on the third day with a gap in the opposite direction with no overlapping shadows.
Explanation:
We
have a similar scenario that is valid for most of the three-day star patterns.
In a falling market, the market shows bearish strength first with a long black candlestick
and opens with a gap on the second day. The second day trading is within a
small range and second day closes at or very near its open. This now suggests
the potential for a rally showing that positions are changed. The signal of
trend reversal is given by the white third day and by well-defined upward gap.
Important
Factors:
The
Bullish Abandoned Baby Pattern is quite rare.
The
reliability of this pattern is very high, but still a confirmation in the form
of a white candlestick with a higher close or a gap-up is suggested.
GENZ fell and churned along the 20 level to establish support. It then
formed a bullish Abandon Baby pattern which began its reversal of the
downtrend. If this pattern formed as the first set of candles at 20, it
is less likely a reversal could have immediately occurred, but since the
Abandon Baby formed after the stock was able to establish support, the
play to the long side became more reliable.
Type: Reversal
Relevance: Bullish
Prior Trend: Bearish
Reliability: High
Type: Reversal
Type: Reversal
Type: Reversal
Since bullish Engulfing patterns have decent reliability when played at
support, Three Outside Up formations have high reliability when they
form in the same situation. Here, FMXI rallied and then gave back about
50% of its gains. The stock then formed a bullish Engulfing pattern and
followed it up with a another up day to complete the Three Outside Up
pattern, and the stock proceeded to bounce over 30% in just one week.
Here is another example of the high reliability bullish Three Outside Up pattern forming at a level that was previously established as support. Note the volume surges.
TEVA was bouncing around in pretty volatile fashion when it formed a bullish Three Outside Up pattern which ended the consolidation period and began the next leg up for the stock
Type: Reversal
Type: Reversal
Important Factors:
4. BULLISH MORNING DOJI STAR
Type: ReversalRelevance: Bullish
Prior Trend: Bearish
Reliability: High
Definition:
This
is also a three-candlestick formation signaling a major bottom reversal. It is
composed of a long black candlestick followed by a doji, which
characteristically gaps down to form a doji star. Then we have a third white
candlestick whose closing is well into the first session’s black real body.
This is a meaningful bottom pattern.
Recognition
Criteria:
1.
Market is characterized by downtrend.
2. We see a long black candlestick in the first day.
3. Then we see a Doji on the second day that gaps in the direction of the previous downtrend.
4. The white candlestick on the third day confirms the reversal.
2. We see a long black candlestick in the first day.
3. Then we see a Doji on the second day that gaps in the direction of the previous downtrend.
4. The white candlestick on the third day confirms the reversal.
Explanation:
Black
real body while market is falling down may suggest that the bears are in
command. Then a Doji appears showing the diminishing capacity of sellers to
drive the market lower. Confirmation of bull ascendancy is the third day’s
strong white real body. An ideal Bullish Morning Doji Star Pattern must have a
gap before and after the middle line’s real body. The second gap is rare, but
lack of it does not take away from the power of this formation.
Important
Factors:
The
Doji may be more than one, two or even three.
Doji’s
gaps are not important.
The
reliability of this pattern is very high, but still a confirmation in the form
of a white candlestick with a higher close or a gap-up is suggested.
5. BULLISH MORNING STAR
Type: Reversal
Relevance: Bullish
Prior Trend:
Bearish
Reliability:
High
Definition:
This
is a three-candlestick formation that signals a major bottom. It is composed of
a first long black body, a second small real body, white or black, gapping
lower to form a star. These two candlesticks define a basic star pattern. The
third is a white candlestick that closes well into the first session’s black
real body. Third candlestick shows that the market turned bullish now.
Recognition
Criteria:
1. Market is characterized by downtrend.
2. We see a long black candlestick in the first day.
3. Then we see a small body on the second day gapping in the direction of the previous downtrend.
4. Finally we see a white candlestick on the third day.
2. We see a long black candlestick in the first day.
3. Then we see a small body on the second day gapping in the direction of the previous downtrend.
4. Finally we see a white candlestick on the third day.
Explanation:
We
see the black body in a falling market suggesting that the bears are in
command. Then a small real body appears implying the incapacity of sellers to
drive the market lower. The strong white body of third day proves that bulls
have taken over. An ideal Bullish Morning Star Pattern preferably has a gap
before and after the middle candlestick. The second gap is rare, but lack of it
does not take away from the power of this formation.
Important
Factors:
The
stars may be more than one, two or even three.
The
color of the star and its gaps are not important.
The
reliability of this pattern is very high, but still a confirmation in the form
of a white candlestick with a higher close or a gap-up is suggested.
6. BULLISH THREE INSIDE UP
Type: Reversal
Relevance: Bullish
Prior Trend:
Bearish
Reliability:
High
Definition:
The
Bullish Three Inside Up Pattern is another name for the Confirmed Bullish
Harami Pattern. The third day is confirmation of the bullish trend reversal.
Recognition
Criteria:
1. Market is characterized by downtrend.
2. We see a Bullish Harami Pattern in the first two days.
3. Then we see a white candlestick on the third day with a higher close than the second day.
2. We see a Bullish Harami Pattern in the first two days.
3. Then we see a white candlestick on the third day with a higher close than the second day.
Explanation:
The
first two days of this pattern is simply the Bullish Harami Pattern, and the
third day confirms the reversal suggested by the Bullish Harami Pattern, since
it is a white candlestick closing with a new high for the last three days.
Important
Factors:
The
reliability of this pattern is very high, but still a confirmation in the form
of a white candlestick with a higher close or a gap-up is suggested.
7. BULLISH THREE OUTSIDE UP
Type: Reversal
Relevance: Bullish
Prior Trend:
Bearish
Reliability:
High
Definition:
The
Bullish Three outside up Pattern is simply another name for the Confirmed
Bullish Engulfing Pattern. The third day is confirmation of the bullish trend
reversal.
Recognition
Criteria:
1.
Market is characterized by downtrend.
2. We see a Bullish Engulfing Pattern in the first two days.
3. The third day is a white candlestick with a higher close than the second day.
2. We see a Bullish Engulfing Pattern in the first two days.
3. The third day is a white candlestick with a higher close than the second day.
Explanation:
The
first two days of this three-day pattern is simply a Bullish Engulfing Pattern,
and the third day confirms the reversal suggested by the Bullish Engulfing
Pattern since it is a white candlestick closing with a new high for the last
three days.
Important
Factors:
The
reliability of this pattern is very high, but still a confirmation in the form
of a white candlestick with a higher close or a gap-up is suggested.
Here is another example of the high reliability bullish Three Outside Up pattern forming at a level that was previously established as support. Note the volume surges.
TEVA was bouncing around in pretty volatile fashion when it formed a bullish Three Outside Up pattern which ended the consolidation period and began the next leg up for the stock
8. BULLISH
THREE WHITE SOLDIERS
Type: Reversal
Relevance: Bullish
Prior Trend:
Bearish
Reliability:
High
Definition:
Bullish
Three White Soldiers Pattern is indicative of a strong reversal in the market.
It is characterized by three long candlesticks stepping upward like a
staircase. The opening of each day is slightly lower than previous close
rallying then to a short term high.
Recognition
Criteria:
1. Market is characterized by downtrend.
2. We see three consecutive long white candlesticks.
3. Each candlestick closes at a new high.
4. The opening of each candlestick is within the body of the previous day.
5. Each consecutive day closes near or at its highs.
2. We see three consecutive long white candlesticks.
3. Each candlestick closes at a new high.
4. The opening of each candlestick is within the body of the previous day.
5. Each consecutive day closes near or at its highs.
Explanation:
The
Bullish Three White Soldiers Pattern appears in a context where the market
stayed at a low price for too long. The market is still falling down and it is
now approaching a bottom or already at bottom. Then we see a decisive attempt
upward shown by the long white candlestick. Rally continues in the next two
days characterized by higher closes. Bears are now forced to cover short
positions.
Important
Factors:
The
opening prices of the second and third days can be anywhere within the previous
day's body. However, it is better to see the opening prices above the middle of
the previous day's body.
If
the white candlesticks are very extended, one should be cautious about an
overbought market.
The
reliability of this pattern is very high, but still a confirmation in the form
of a white candlestick with a higher close or a gap-up is suggested.
Here is an example of a bullish Three White Soldiers formation that
formed well into CP's uptrend. I personally think it's a little late to
chase the stock, so this merely serves as an example of what this
pattern looks like.
9. BULLISH CONCEALING BABY SWALLOW
Type: Reversal
Relevance: Bullish
Prior Trend:
Bearish
Reliability:
High
Definition:
This
pattern is highlighted by two consecutive Black Marubozu. They are
characterized by the fact that a gapping black candlestick trades into the body
of the previous day and it is seen during a downtrend. Then there is another
Black Marubozu on the third day showing sale of positions since it closes at a
new low. However this may give incentive to the shorts to cover their positions
implying that a bullish reversal is now possible.
Recognition
Criteria:
1. Market is characterized by downtrend.
2. We see two consecutive Black Marubozu in the first and second days.
3. Then we see a black candlestick on the third day opening with a downward gap but trading into the body of the second day and it is characterized by a long upper shadow.
4. Finally we see another Black Marubozu on the fourth day that completely engulfs the candlestick of the third day including the shadow.
2. We see two consecutive Black Marubozu in the first and second days.
3. Then we see a black candlestick on the third day opening with a downward gap but trading into the body of the second day and it is characterized by a long upper shadow.
4. Finally we see another Black Marubozu on the fourth day that completely engulfs the candlestick of the third day including the shadow.
Explanation:
Two
black Marubozu show that downtrend is continuing to the satisfaction of the
bears. On the third day, we see a downward gap further confirming the
downtrend. However, prices on the third day start going above the close of the
previous day causing some doubts about the bearish direction even though the
day closes at or near its low. The next day shows us a significantly higher gap
in the opening. After the opening, however, prices again go down closing at a
new low. This last day may be interpreted as a good chance for the
short-sellers to cover their short positions.
Important Factors:
The
reliability of this pattern is very high, but still a confirmation in the form
of a white candlestick with a higher close or a gap-up is suggested.
