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Candlestick stock charts have been used for a long time as a method to predict future price movement of stocks, which is often referred to as technical analysis.
Using candlestick stock chart patterns can help youforecast what the stock might do next. Learning how to read stock charts and identify these patterns can help you with developing your own stock picking strategies.
How to Read Candlestick Charts
You may also want to check out our resource on how to read candlestick patterns.
We’ve put together this helpfullist of candlestick stock charts free of charge to you so that you can use these in studying various stocks and as you learn how to analyze a stock chart. As always, you should use your best judgement in whether these trends may be accurate for forecasting the future.
Here is a list of a few common candlestick charts patterns:
{In alphabetical order}
Abandoned Baby Pattern:
There are two types of abandoned baby patterns – one which is bullish {which means prices are expected to continue rising} and one which is bearish {which means prices are expected to continue dropping}.
In this pattern, there is downtrend in the beginning. Then after the first day there is a large gap {which means the price changed dramatically overnight} – On the second day it stayed stagnant {which is characterized by the “+” which means indecision}.On the lastdaythe stockprice opened higherand began to rise. This signals a reversal, which can cause many people to believe the price will continue to rise from this point on.
Now let’s look at the bullish abandoned baby pattern:
This abandoned baby candlestick pattern is exactly the opposite. This can be a signal that the stock price will continue to drop.
The Dark Cloud Cover
In this candlestick stock chart, you seen an obvious uptrend of the stock prices in the first 3 days. On thefourth day, even though the candlestick appears higher, it actually closes below the middle of the third day, which indicates a sell-off. This could mean a reversal in which the stock prices would continue to drop after this point.
The Doji Candlestick
Doji candlesticks are commonly found in a number of patterns. This one shown here typically signifies a lot of price movement, as indicated by the longer shadows, howeverthe stock price open and close were around the same amount.
Downside Tasuki Gap
In this chart, we have a downtrend for the first three days…then a large gap on the fourth day where the price drops.On the fifth day the opening price is higher.Notice the price actionof the fifth dayrises above the gap line. This means on thelast day that the gap is nearly filled in. In technical stock analysis, the phrase “filling the gap” is often a large indicator ofa reversal.
Dragonfly Doji Pattern
A dragongly doji means the price was high at both the open and close of the day. This typically is an indication of a change about to occur in the stock pricepattern.
Engulfing Candlestick Pattern
There are two possibilities for this pattern – bullish or bearish. In the bearish example, you will notice the second candle “engulfs” the first – the second candleis much larger than the first candle. Therecognition of these patterns ultimately means the closing price finishes below the opening price of the previous day. The Bullish is the opposite. This typically indicates a lot of selling in the bearish market and a lot of buying happening in the bullish market. This sudden uptick in activity may indicate a future stock trend.
The Evening Doji Star
In this example, the prices are steadily rising, followed by a gap up of indecision {notice the doji}, followed by a gap down and asignificantsell off.
Evening Star Candlestick
Like the evening doji star, the evening star follows a similiar candestick pattern. However, instead of a doji, you see a spinning top, which still indicates indecision, but there is more price movement before the sell-off.
Falling Three Method
In this candlestick pattern, we have 4 days of a sell-off, followed by three short days which close above the open. However, the most significant thing to note is that none of three days overcome the sell off which took place on Day 4. On the final day 8, there is a massive downtrend in the price of the stock which could indicate future falling prices.
Gravestone Doji
{Also sometimes called a Tombstone Doji}
This is the opposite of a dragonfly doji and means the stock price opened low and closed low. Like most dojis you will see in the free stock charts you analyze, this can indicate a reversal or change in the price.
Hammer Candlestick Pattern
The hammer is a series of sell-offs for three days. On day 4the price opens low and the price contiues to fall, howeverby the afternoon prices of the stocks shoot up. {This is often known as a “rally”} The price closes at its highest point of the day.
Hanging Man Candlestick
This candlestick chart has three uptrending days in the price movement. On the fourth day, after the market opens in the morning, the price of the stock drops dramatically {which is indicated by the lower tail of the candle} – but then…the price rallies and steadily gains all the way up into the end of the trading day at which point it closes at the all-time high of the day.
Harami
This starts with 4 days of increasing priceswhere the price is going up – on the fifth day, the price opens significantly lower than the closing price of the previous day and continues to drop – much like an engulfing pattern which could indicate a loss of momentum in the stock price.
Harami Cross
Like the Harami, the Harami cross has the fifth day as a Doji. This typically indicates indecision in the market for that particular stock and could possibly mean lower prices to come.
Inverted Hammer
The inverted hammer begins with four days of prices dropping rapidly. On the fifth day, there is a rebound – even though it opened lower than the closing price of the previous day, it trades for a higher amount, but closes near its open, looking like an inverted hammer candlestick chart pattern.
Long Day Candlestick
Perhaps one of the most simple ones to remember – this simply means the stock price either dropped or rose dramatically over the course of the day.
Long Legged Doji Candlestick Chart
In this sample, it’s important to notice the long length of the shadows or tails of the candle. This means there was a lot of price movement and trading during the day, however, the opening price and the closing priced remained the same.
As with other dojis, even though there was fluctuating price movement, it should still be considered as indecision and possibly a turning point for the future of the stock price.
Long Shadows Candlestick
The shadows of a candlestickshow a difference between the open and the low price of the stock. The Bearish has a long upper shadow and a short low shadow. What this shows is that the buyers started in charge, but the then sellers took over, and the prices dropped so the closing price was low. This is what makes the shadow longer. The Bullish is the opposite of this – sellers began with control, and then the buyers took over and made prices higher.
Marubozu
The Marubozu candlesticks have no shadows. This means the stock moved steadily and strongly throughout the entire day – if the candle is white, it is a bullish market meaning prices went up, and if the candle is black, this means the prices fell very steadily.
Morning Doji Star Candlestick
Here we have the morning doji star candlestick. It begins with dropping price trends each day, then a day of indecision {the doji} – and then a day where the price increased steadily and then closed above the midpoint of the day before the doji.
Morning Star
The morning star is just like the morning doji star, except there is a gap between the closing price of the black candleand the opening price of the small white candle. However, by thefinalday, the prices increase higher than the midpoint of the day before the gap.
Piercing Line
Here we have 4 days of dropping prices. On the last day, prices start low, but then end up closing higher than the mid point of the previous day.
Rising Three Method
In this pattern, you will want to focus on the three black candles. Notice that even though the prices are dropping, they are never able to get lower than the first day. On the final day, the reversal occurs {this means a change in direction of price} – and the price then begins an upward trend.
Shooting Star Candlestick
The shooting star begins with four days of positive price action and growth. On the last day, the opening price continues to go up in the morning, however by afternoon the prices begin to fall and it will close on the lowest price of the day.
Short Day
A short day simply means little movement in the prices.
Spinning Top
A spinning top means lots of activity, but the price doesn’t move very much between the open and close.
Stick Sandwich
On this chart pattern example, you only want to focus on the bottom of the two black candles. Notice that the price is never able to get below that point. This can be a sign of a reversal in the stock’s price. This is also sometimes called a double bottom.
Three Black Crows
This one is never a good one to see unless you are planning to short sell. Basically, the stock is showing three days in a row of a significant sell off.
Three White Soldiers
This is a bullish pattern. This could potentially be a good buying signal.
Upside Gap Two Crows
Here the candles are going up for three days…and then while the market is closed, the price jumps up {notice the gap between the white candle and the black candle}. This gap up indicates that the traders do not agree with the price increase and that prices may continue to drop and lose momentum.
Upside Tasuki Gap
This is the Upside Tasuki Gap candlestick chart pattern. What happened here is that investors believed the price would continue to go up {and so they agreed with the “gap” that occurred between the close and the open} – but then a majority of tradersdecided to sell their shares, causing the prices to drop.
Candlestick Patterns Can Be a Strong Indicator for Choosing a Stock
Now that you have learned about the different candlestick chart patterns, you can see how these can be quite useful as a technical indicator when you are trading. Learning how to analyze stock patterns can be very helpful when you are researching the different stocks you may wish to invest in.
We hope you found this chart pattern research helpful.As always, it is extremely important to do your own due diligence in analyzing and researching stocks. With any candlestick pattern, it’s always possible that you may either interpret the patterns incorrectly, or that the stock would perform differently than anticipated.
Are there any patterns we might have missed that you would like us to add to our list? What are some of your favorite candlesticks patterns to watch for? Tell us about them below and we’ll add them to our candlestick charts list! We’d love to hear your comments and feedback!
