The Matching Low candlestick pattern is a simple but useful pattern often found in technical analysis, particularly when traders are analyzing price action in financial markets such as stocks, forex, or commodities. It typically appears in a downtrend and can be interpreted as a potential reversal signal or indication of market indecision.
The Matching Low is a two-candle pattern characterized by two consecutive candlesticks that have the same or nearly identical low prices, but the bodies of the candlesticks can be different in size and color. This pattern suggests that the market has reached a support level where the downward momentum is losing strength.
Imagine a stock is in a downtrend, and it drops to a low of $50. It then rallies to $55, but shortly after, it falls again, testing that $50 low. The price fails to break below $50, and the second candlestick also has a low at exactly $50. This could be interpreted as a Matching Low pattern. If the price starts moving upward after the second candle, it could signal a potential reversal and an opportunity to enter a long (buy) position.
By keeping these key points in mind, you can effectively incorporate the Matching Low pattern into your technical analysis toolbox.
The Harami Cross is a reversal candlestick pattern that is similar to the basic Harami pattern but has one key difference: the second candle in a Harami Cross is a Doji. A Doji is a candlestick with little or no body, meaning the opening and closing prices are virtually the same, indicating market indecision.
The Harami Cross is considered a neutral pattern, and it suggests that a trend might be nearing an end and could reverse. However, like many candlestick patterns, confirmation from other technical indicators is often necessary to increase its reliability.
The Harami Cross consists of two candlesticks:
First Candle (Mother Candle)
Second Candle (Baby Candle – Doji)
The presence of the Doji is the key distinction between the Harami Cross and the regular Harami, as it signals indecision and a potential change in direction.
A bullish Harami Cross typically appears after a downtrend and suggests a potential reversal to the upside. The pattern is formed as follows:
Interpretation:
A bearish Harami Cross typically appears after an uptrend and signals a potential reversal to the downside. The pattern is formed as follows:
Interpretation:
For the Harami Cross to be valid, certain characteristics must be present:
First Candle (Mother Candle)
Second Candle (Doji)
Trend Context
The Harami Cross can be a powerful reversal signal, but like any candlestick pattern, it’s better to confirm it with additional indicators or price action to improve the reliability of the trade.
Entry Signal
Stop Loss
Take Profit
Risk Management
To enhance the reliability of the Harami Cross, traders often use additional indicators or tools to confirm the pattern.
Volume
Momentum Indicators
Trend Indicators
Like all candlestick patterns, the Harami Cross has its limitations and risks:
False Signals
Lack of Momentum
Trend Context
Let’s say the market is in a downtrend:
In this case, a trader might enter a long position after the breakout above the Doji’s high, with a stop loss placed below the Doji’s low. The take profit can be set at a previous swing high or a key resistance level.
The Harami Cross is a powerful candlestick reversal pattern that signals potential market indecision and a possible shift in trend direction. The pattern consists of two candles: a long mother candle followed by a small Doji that is contained within the range of the first candle.
Traders should confirm the pattern with other technical indicators, such as volume, RSI, MACD, and moving averages, and use proper risk management strategies to ensure the success of their trades.
The Harami Cross is a reversal candlestick pattern that is similar to the basic Harami pattern but has one key difference: the second candle in a Harami Cross is a Doji. A Doji is a candlestick with little or no body, meaning the opening and closing prices are virtually the same, indicating market indecision.
The Harami Cross is considered a neutral pattern, and it suggests that a trend might be nearing an end and could reverse. However, like many candlestick patterns, confirmation from other technical indicators is often necessary to increase its reliability.
The Harami Cross consists of two candlesticks:
First Candle (Mother Candle)
Second Candle (Baby Candle – Doji)
The presence of the Doji is the key distinction between the Harami Cross and the regular Harami, as it signals indecision and a potential change in direction.
A bullish Harami Cross typically appears after a downtrend and suggests a potential reversal to the upside. The pattern is formed as follows:
Interpretation:
A bearish Harami Cross typically appears after an uptrend and signals a potential reversal to the downside. The pattern is formed as follows:
Interpretation:
For the Harami Cross to be valid, certain characteristics must be present:
The Harami Cross can be a powerful reversal signal, but like any candlestick pattern, it’s better to confirm it with additional indicators or price action to improve the reliability of the trade.
Entry Signal
Stop Loss
Take Profit
Risk Management
To enhance the reliability of the Harami Cross, traders often use additional indicators or tools to confirm the pattern.
Volume
Momentum Indicators
Trend Indicators
Like all candlestick patterns, the Harami Cross has its limitations and risks:
False Signals
Lack of Momentum
Trend Context
Let’s say the market is in a downtrend:
In this case, a trader might enter a long position after the breakout above the Doji’s high, with a stop loss placed below the Doji’s low. The take profit can be set at a previous swing high or a key resistance level.
The Harami Cross is a powerful candlestick reversal pattern that signals potential market indecision and a possible shift in trend direction. The pattern consists of two candles: a long mother candle followed by a small Doji that is contained within the range of the first candle.
Traders should confirm the pattern with other technical indicators, such as volume, RSI, MACD, and moving averages, and use proper risk management strategies to ensure the success of their trades.
The Harami is a reversal candlestick pattern that appears in both bullish and bearish variants. It indicates that the prevailing trend may be about to reverse, as it reflects a shift in market sentiment. The term “Harami” comes from the Japanese word for “pregnant,” because the pattern looks like a small candlestick (the “baby”) is contained within the body of a larger candlestick (the “mother”). This pattern is often used by traders to identify potential trend reversals.
The Harami pattern consists of two candles:
The Harami can occur after an uptrend (bullish Harami) or a downtrend (bearish Harami), and it suggests that the momentum of the trend is weakening, possibly indicating a reversal or pause.
A bullish Harami typically forms after a downtrend and signals that a reversal to the upside is likely. The pattern consists of:
Bullish Harami Interpretation:
A bearish Harami typically forms after an uptrend and suggests that a reversal to the downside is likely. The pattern consists of:
Bearish Harami Interpretation:
For the Harami pattern to be considered valid, it should have the following characteristics:
First Candle (Mother Candle)
Second Candle (Baby Candle)
Trend Context
Traders often use the Harami pattern as an early signal of a possible reversal, but it is recommended to wait for confirmation before acting on it. Here’s how to trade the pattern:
Entry Signal
Stop Loss
Take Profit
Risk Management
While the Harami is a useful reversal pattern, it’s always better to confirm the signal with additional indicators and analysis. Here are some ways to confirm the validity of the Harami:
Volume
Momentum Indicators
Trend Indicators
While the Harami is a useful pattern, it has some limitations and risks:
False Signals
Lack of Momentum
Trend Context
Stop-Loss Placement
Let’s say the market is in a downtrend:
In this case, a trader may consider entering a long position if the price closes above the high of the second candle, with a stop loss placed below the low of the second candle. The take profit target can be set at a previous swing high or resistance level.
The Harami is a popular and important reversal candlestick pattern that signals a potential shift in market sentiment. It consists of two candles: a large mother candle followed by a smaller baby candle whose body is entirely contained within the first candle’s body.
To trade the Harami pattern effectively, it’s important to wait for confirmation through additional indicators such as volume, RSI, MACD, and moving averages. Proper risk management (including stop-loss placement) is also essential to ensure a successful trade.
The Railway Track pattern is a bullish reversal candlestick formation that typically appears in a downtrend or after a significant price decline. It signals that the market is likely to reverse direction and move higher, as the bulls (buyers) start to overpower the bears (sellers). The pattern consists of two candlesticks that resemble the appearance of railway tracks (hence the name), and it is considered a relatively strong reversal signal when properly identified.
The Railway Track pattern is a two-candle formation that appears in a downtrend. The pattern consists of the following:
First Candle: A Bearish Candle
Second Candle: A Bullish Candle
Here’s how the Railway Track looks visually:
┌─────────────────────┐
│ Bearish │
│ (Long Red) │
└─────────────────────┘
┌─────────────────────┐
│ Bullish │
│ (Long Green) │
└─────────────────────┘
For the Railway Track pattern to be valid, the following criteria should be observed:
First Candle (Bearish)
Second Candle (Bullish)
Same Size or Larger Body
The Railway Track pattern is interpreted as a bullish reversal signal. Here’s how to interpret the pattern:
The Railway Track pattern can be used to enter long positions or buy when anticipating a reversal from a downtrend. Here’s how to trade the pattern effectively:
Entry Signal
Stop Loss
Take Profit
Risk Management
While the Railway Track is a reliable reversal pattern on its own, traders often use additional indicators to confirm the pattern and improve the probability of a successful trade:
Like any candlestick pattern, the Railway Track has its limitations and risks:
False Signals
Trend Context
Stop-Loss Placement
Let’s say the market is in a downtrend, and we observe the following:
At this point, a trader may enter a long position after the second candle closes above the midpoint of the first candle, with a stop loss placed below the low of the first or second candle, and a target at the next resistance level.
The Railway Track is a strong bullish reversal pattern that appears after a downtrend, signaling that the market sentiment is shifting from bearish to bullish. The pattern consists of a long bearish candle followed by a long bullish candle that opens below the low of the first candle and closes above its midpoint.
Traders can use the Railway Track to enter long positions in anticipation of a price reversal, but it’s important to
confirm the pattern with other indicators, such as volume, RSI, or MACD. Proper risk management and stop-loss placement are essential to trading the Railway Track successfully.
The Piercing Line is a bullish reversal candlestick pattern that occurs in a downtrend or after a significant price decline. This pattern suggests that the sellers’ control over the market is weakening and that buyers are starting to take charge, signaling the potential for a price reversal and the beginning of an uptrend.
The Piercing Line consists of two candlesticks:
The pattern is considered complete and valid when the second candle closes above the midpoint of the first candle’s body. The larger the bullish candlestick and the higher it closes relative to the first candle, the stronger the reversal signal.
To properly identify the Piercing Line pattern, the following criteria should be met:
First Candle: A Bearish Candle
Second Candle: A Bullish Candle
Here’s what the Piercing Line looks like visually:
┌─────────────────────┐
│ Bearish │
│ (Large Red) │
└─────────────────────┘
┌─────────────────────┐
│ Bullish │
│ (Large Green) │
└─────────────────────┘
To confirm the Piercing Line as a valid pattern, it should exhibit the following characteristics:
The Piercing Line is a bullish reversal pattern, and it suggests that the market is shifting from a bearish to a bullish sentiment. Here’s how to interpret the pattern:
The Piercing Line is a bullish reversal pattern, and traders can use it to enter long positions in anticipation of a price rally. Here’s how to trade the pattern effectively:
Entry Signal
Stop Loss
Take Profit
Risk Management
While the Piercing Line pattern is already a strong signal of a potential reversal, traders often use additional tools to confirm the pattern and improve the probability of a successful trade:
Volume
Momentum Indicators
Trend Indicators
While the Piercing Line is a useful and reliable reversal pattern, there are some limitations and risks to be aware of:
False Signals
Trend Context
Stop Loss Placement
Let’s say the market is in a downtrend, and we observe the following:
At this point, a trader may enter a long position after the second candle closes above the midpoint of the first candle, with a stop loss placed below the low of the first or second candle, and a target at the next resistance level.
The Piercing Line is a bullish reversal pattern that occurs after a downtrend, signaling that the bears’ control over the market is weakening, and the bulls are gaining strength. The pattern consists of two candles: a long
bearish candle followed by a long bullish candle that opens below the previous candle’s low but closes above its midpoint. This pattern suggests the potential for a trend reversal to the upside.
Traders can use the Piercing Line to enter long positions, but it’s important to confirm the pattern with additional indicators, such as volume, RSI, or MACD. Proper risk management, including stop-loss placement and position sizing, is essential for trading the Piercing Line successfully.
The Three Black Crows is a bearish reversal candlestick pattern that typically forms at the peak of an uptrend and signals a potential change in trend from bullish to bearish. It is one of the most reliable candlestick patterns for predicting the continuation of a downtrend. The pattern consists of three consecutive long bearish (red or black) candlesticks that close progressively lower, each opening within or near the body of the previous candle. The pattern suggests that the bears (sellers) have taken control of the market, overpowering the bulls (buyers).
The Three Black Crows pattern is composed of three candlesticks, and it generally forms during an uptrend or after a strong rally. Each candle in the pattern has the following characteristics:
First Candle: A Large Bullish Candle
Second Candle: A Large Bearish Candle
Third Candle: Another Large Bearish Candle
Here’s how the Three Black Crows pattern typically looks:
┌─────────────────────┐
│ Bullish │
│ (Large Green) │
└─────────────────────┘
┌─────────────────────┐
│ Bearish │
│ (Large Red) │
└─────────────────────┘
┌─────────────────────┐
│ Bearish │
│ (Large Red) │
└─────────────────────┘
To ensure that the Three Black Crows pattern is valid, the following key features should be observed:
First Candle (Bullish)
Second Candle (Bearish)
Third Candle (Bearish)
The Three Black Crows pattern signals a strong bearish reversal after an uptrend. Here’s the interpretation of each phase:
The Three Black Crows pattern is used by traders to enter short positions or sell in anticipation of a bearish continuation. Here’s how to trade the pattern effectively:
Entry Signal
Stop Loss
Take Profit
Risk Management
While the Three Black Crows pattern is a strong signal on its own, traders often use additional tools to confirm the pattern and improve the likelihood of success:
Volume
Momentum Indicators
Trend Indicators
Like any candlestick pattern, the Three Black Crows pattern has some limitations and risks:
False Signals
Trend Context
Stop-Loss Management
Let’s say the market is in an uptrend, and we observe the following:
At this point, the trader can enter a short position after the third bearish candle closes, with a stop loss above the high of the third candle and a target at a key support level.
The Three Black Crows is a powerful bearish reversal pattern that indicates a shift in market sentiment from bullish to bearish. The pattern is composed of three long bearish candles that close progressively lower, signaling the growing dominance of the bears over the bulls. It is a strong signal that a downtrend may be about to begin or continue after an uptrend.
Traders can use the Three Black Crows pattern to enter short positions, but it’s important to confirm the pattern with additional indicators such as volume, momentum oscillators, and trend-following indicators. Proper risk management and stop loss placement are crucial to successfully trading this pattern. As with all candlestick patterns, context is important—ensure the pattern forms after a strong uptrend for the best results.
The Evening Doji is a bearish reversal candlestick pattern that signals a potential top or reversal at the end of an uptrend. It is characterized by a Doji candlestick (a candle with an almost equal opening and closing price, forming a cross-like shape) that appears after a strong uptrend. The Evening Doji indicates that buyers may be losing control, and sellers are starting to take over, leading to a possible downturn.
When an Evening Doji pattern forms, it suggests that the market might be experiencing a shift in momentum from bullish to bearish, potentially marking the start of a downtrend.
The Evening Doji is a two-candle pattern, typically appearing after a strong uptrend. It consists of the following components:
First Candle: A Large Bullish Candle
Second Candle: A Doji Candle
Here’s how the Evening Doji pattern typically looks:
┌─────────────────────┐
│ Bullish │
│ (Large Green) │
└─────────────────────┘
┌─────────────────────┐
│ Doji │
│ (Small Body, Long Wicks) │
└─────────────────────┘
The Evening Doji pattern suggests a potential bearish reversal after an uptrend. Here’s a breakdown of the interpretation of each phase:
The Evening Doji pattern is used by traders to sell or enter short positions in anticipation of a price decline. Here’s how to trade the pattern effectively:
Entry Signal
Stop Loss
Take Profit
Risk Management
While the Evening Doji is a powerful candlestick pattern on its own, traders often look for confirmation to improve the accuracy of their trade:
Volume
Momentum Indicators
Trend Indicators
Like all candlestick patterns, the Evening Doji has its limitations, and there are certain risks to be aware of:
False Signals
Context Matters
Stop Loss Management
Let’s say that the market is in an uptrend, and we notice the following:
At this point, the trader can enter a short position, with a stop loss above the high of the Doji or the first bullish candle, targeting lower support levels for profit.
The Evening Doji is a potent bearish reversal pattern that occurs at the peak of an uptrend, signaling a shift in market momentum. It consists of two candlesticks:
The pattern suggests that the bulls are losing control, and the market may soon reverse into a downtrend. Traders can use this pattern to identify short-selling opportunities, but it is important to confirm the signal with additional indicators such as volume, momentum oscillators, or trend indicators. Proper risk management and stop loss placement are crucial to trading the Evening Doji effectively.
As always, using the Evening Doji in combination with other technical analysis tools can help improve the accuracy and reliability of the trade signal.
The Three Inside Down is a bearish reversal candlestick pattern that typically appears after a strong uptrend. It signals a shift in momentum from bullish to bearish, indicating that the market may be preparing for a downtrend. The pattern consists of three candles and is used by traders to identify potential selling opportunities.
The Three Inside Down pattern is made up of three candles. It occurs during an uptrend and signals the start of a possible downtrend. Here’s how the pattern is formed:
First Candle: A Bullish Candle (Uptrend)
Second Candle: A Smaller Bearish Candle (Engulfed by the First)
Third Candle: A Large Bearish Candle (Confirmation of Reversal)
Here’s how the Three Inside Down pattern looks:
┌─────────────────────┐
│ Bullish │
│ (Large Green) │
└─────────────────────┘
┌─────────────────────┐
│ Bearish │
│ (Small Red, Inside)│
└─────────────────────┘
┌─────────────────────┐
│ Bearish │
│ (Large Red) │
└─────────────────────┘
To ensure the Three Inside Down pattern is valid, the following key conditions should be met:
First Candle (Bullish)
Second Candle (Smaller Bearish Candle)
Third Candle (Large Bearish Candle)
The Three Inside Down pattern signals a bearish reversal of an uptrend. Here’s the interpretation of each phase of the pattern:
The Three Inside Down pattern is used to enter short positions (selling) in anticipation of a bearish move. Here’s how to trade the pattern effectively:
Entry
Stop Loss
Take Profit
While the Three Inside Down is a strong pattern on its own, traders often look for additional confirmation to improve the reliability of the signal:
Like all candlestick patterns, the Three Inside Down pattern has its limitations, and there are risks associated with trading it:
The Three Inside Down pattern is a powerful bearish reversal candlestick pattern that signals a shift from an uptrend to a downtrend. It consists of three candles:
Traders use this pattern to identify potential short-selling opportunities. Proper risk management, confirmation with volume or other indicators, and correct stop-loss placement are essential to increasing the likelihood of success when trading the Three Inside Down pattern.
As with all candlestick patterns, it is important to combine this pattern with other technical analysis tools and strategies to enhance its reliability and effectiveness.
The Falling Three Methods is a bearish continuation candlestick pattern that occurs in a downtrend and indicates that the trend will likely continue after a brief consolidation or counter-trend rally. It is a technical analysis tool used to predict the continuation of a downward move in price. The pattern is composed of five candles and is considered a reliable signal for traders looking to capitalize on a bearish market movement.
The Falling Three Methods is the opposite of the Rising Three Methods pattern, which signals a bullish continuation.
The Falling Three Methods pattern is made up of five candlesticks, and it usually forms after a pronounced downtrend. The structure is as follows:
Here’s how the Falling Three Methods pattern typically looks:
┌─────────────────────┐
│ Bearish │
│ (Long Red) │
└─────────────────────┘
┌────┬────┬────┬────┐
│ Bullish │ Bullish │ Bearish │ Bearish │
└────┴────┴────┴────┘
┌─────────────────────┐
│ Bearish │
│ (Long Red) │
└─────────────────────┘
To properly identify the Falling Three Methods, the following conditions should be met:
The Falling Three Methods pattern is a continuation pattern, meaning it suggests that the prior trend (the downtrend) will continue. Here’s the reasoning behind the pattern:
The key takeaway is that the market may temporarily stall, but the sellers will push the price lower again, following the initial strong downtrend.
Traders can use the Falling Three Methods pattern to enter a short position (selling) with the expectation that the downtrend will continue. Here’s how you might trade the pattern:
Entry Signal
Stop Loss
Take Profit
While the Falling Three Methods pattern can be a strong signal on its own, traders often look for additional confirmation to improve the accuracy of the trade:
Like any pattern, the Falling Three Methods has its limitations:
The Falling Three Methods is a bearish continuation pattern that signals a brief consolidation during a downtrend, followed by the resumption of the downward movement. Traders look for this pattern to enter short positions, anticipating that the trend will continue after the consolidation phase.
To trade this pattern effectively:
When identified correctly, the Falling Three Methods can provide a strong signal for traders looking to capitalize on continued downward momentum in the market.