Bullish Low Reliability Reversal Candle Patters
1. BULLISH BELT HOLD PATTERN
BULLISH BELT HOLD PATTERN
Type: Reversal
Relevance: Bullish
Prior Trend: Bearish
Reliability: Low
Confirmation: Required
Definition:
The Bullish Belt Hold Pattern is a single candlestick pattern. It is
basically a White Opening Marubozu that occurs in a downtrend. As such; it
opens on its low, then we see a rally during the day against the overall trend
of the market, and then the day closes near its high but not necessarily at its
high. If Belt Hold lines are characterized by longer bodies, then it means that
they offer more resistance to the trend they are countering.
Recognition Criteria:
1. There must be an overall downtrend in the market.
2. The day gaps down, and the market opens at its low but then prices go up during the day and they close near to the day’s high.
3. We see a white body that has no lower shadow that is a White Opening Marubozu.
2. The day gaps down, and the market opens at its low but then prices go up during the day and they close near to the day’s high.
3. We see a white body that has no lower shadow that is a White Opening Marubozu.
Explanation:
The market starts the day with a significant gap in the direction of
prevailing downtrend. So the first impression reflected in the opening price is
continuation of the downtrend. However; then the things change rapidly and the
following price action of the day is the opposite of the previous trend. This obviously
causes much concern among some shorts and leads to covering of many short
positions. This accentuates the reversal and it may signify a rally for the
bulls.
Important Factors:
The trend reversal implied by Bullish Belt Hold pattern requires further
confirmation in the form of either a white candlestick, a large gap up or a
higher close on the next trading day.
2. BULLISH
HAMMER
BULLISH HAMMER
Type: Reversal
Relevance: Bullish
Prior Trend: Bearish
Reliability: Low
Confirmation: Definitely required
Definition:
The Bullish Hammer Pattern is a
significant candlestick that occurs at the bottom of a trend or during a
downtrend and it is called a hammer since it is hammering out a bottom. The
Bullish Hammer Pattern is a single candlestick pattern and it has a strong
similarity to the Bullish Dragonfly Doji Pattern. In the case of Bullish
Dragonfly Doji Pattern, the opening and closing prices are identical whereas
the Bullish Hammer Pattern has a small real body at the upper end of the
trading range.
Recognition Criteria:
1. The market is characterized by a
prevailing downtrend.
2. Then we see a small real body at the upper end of the trading range. Color of this body is not important.
3. We would like to see the lower shadow at least twice as long as the real body.
4. There is no (or almost no) upper shadow.
2. Then we see a small real body at the upper end of the trading range. Color of this body is not important.
3. We would like to see the lower shadow at least twice as long as the real body.
4. There is no (or almost no) upper shadow.
Explanation:
The overall direction of the market
is bearish, characterized by a downtrend. Then the market opens with a sharp
sell off implying the continuation of the downtrend. However, prices suddenly
turn upwards, the sell-off is quickly abated and bullish sentiment continues
during the day with a closing price at or near to its high for the day which
causes the long lower shadow. Apparently the market fails to continue in the
selling side. This observation reduces the previous bearish sentiment causing
the short traders to feel increasingly uneasier with their bearish positions.
Important Factors:
If the hammer is characterized by a
close above the open thus causing a white body, the situation looks even better
for the bulls.
The Bullish Dragonfly Doji pattern
is generally considered more bullish than the Bullish Hammer Pattern and a
higher reliability is ascribed to this Doji than the Bullish Hammer Pattern.
The reliability of Bullish Hammer
Pattern is low. It requires confirmation of the implied trend reversal by a
white candlestick, a large gap up or a higher close on the next trading day.
3. BULLISH
INVERTED HAMMER
Type: Reversal
Relevance: Bullish
Prior Trend: Bearish
Reliability: Low
Confirmation: Definitely required
Definition:
Bullish Inverted Hammer Pattern is a
candlestick characterized by a long upper shadow and a small real body preceded
by a long black real body. It is similar in shape to the Bearish Shooting Star.
The shooting star appears in a downtrend and thus it becomes a potentially
bullish inverted hammer.
Recognition Criteria:
1. Market is currently characterized
by downtrend.
2. The first day of the pattern is a black candlestick formed at the lower end of the trading range.
3. The second day of the pattern is a small real body and is formed at the lower end of the trading range.
4. The color of the second real body is not important, however the color of the body is black in the first day.
5. No gap down is required, as long as the pattern is seen after a downtrend.
6. Upper shadow of the second small body should be at least twice as long as the real body.
7. The second body does not have lower shadow or it has only a very little lower shadow.
2. The first day of the pattern is a black candlestick formed at the lower end of the trading range.
3. The second day of the pattern is a small real body and is formed at the lower end of the trading range.
4. The color of the second real body is not important, however the color of the body is black in the first day.
5. No gap down is required, as long as the pattern is seen after a downtrend.
6. Upper shadow of the second small body should be at least twice as long as the real body.
7. The second body does not have lower shadow or it has only a very little lower shadow.
Explanation:
Bullish Inverted Hammer Pattern
occurs in a bearish background. In a day of inverted hammer, market opens at or
near its low. Then prices change direction and we see a rally. However the
bulls cannot succeed to sustain the rally during the rest of the day and prices
finally close either at or near the low of the day. It may not be clear why
this type of price action is interpreted as a potential reversal signal. The
answer has to do with what happens over the next day. If the next day opens
above the real body of the inverted hammer, it means that those who shorted at
the opening or closing of the inverted hammer day are losing money. The longer
the market holds above the inverted hammer’s real body, the more likely these
shorts will attempt to cover their positions. This may ignite a rally as a
result of covered short positions, which may then inspire the bottom pickers to
take long positions.
Important Factors:
Bullish verification on the day following the
inverted hammer is required. This verification can be in the form of the next
day opening above the inverted hammer’s real body. The larger the gap the
stronger the confirmation will be. A white candlestick with higher prices can
also be another form of confirmation.
4. BULLISH
HARAMI
BULLISH HARAMI
Relevance: Bullish
Prior Trend: Bearish
Reliability: Low
Confirmation:
Strongly suggested
Definition:
Bullish Harami Pattern is
characterized by a small white real body contained within a prior relatively
long black real body. “Harami” is an old Japanese word for “pregnant”. The long
black candlestick is “the mother” and the small candlestick is “the baby”.
Recognition Criteria:
1. The market is in a bearish mood characterized by downtrend.
2. Then we see a long black candlestick.
3. We see a white candlestick on the following day where the small white real body is completely engulfed by the real body of the first day. The shadows (high/low) of the second candlestick are not necessarily contained within the first body, however it's preferable if they are.
2. Then we see a long black candlestick.
3. We see a white candlestick on the following day where the small white real body is completely engulfed by the real body of the first day. The shadows (high/low) of the second candlestick are not necessarily contained within the first body, however it's preferable if they are.
Explanation:
The Bullish Harami Pattern is a sign of disparity about the market’s health.
While the market is characterized by downtrend and bearish mood; there is heavy
selling reflected by a long, black real body however it is followed by a small
white body in the next day. This may signal a trend reversal since the second
day’s small real body shows that the bearish power is diminishing.
Important Factors:
The decisive fact about this pattern is that the second candlestick has a
minute real body relative to the prior candlestick. Furthermore this small body
is completely inside the larger one. The Bullish Harami Pattern does not
necessarily imply that a rally will follow. Market usually enters into a
congestion phase following the Bullish Harami.
We may need a third day confirmation to be sure that the downtrend has
really reversed. This confirmation of the trend reversal may be signaled by a
white candlestick, a large gap up or by a higher close on the third day.
