Multiple Candlestick Pattern - Technical Analysis - 2

In My last post I gave a summary of Single Candlestick Pattern where we were predicting market using only single stick. In this article we will look at some important multiple Candlestick Patterns. We will be using two or more than to stick to know where the market will heed.
One more thing we should be aware of in multiple Candlestick pattern is that it's better to enter on day one closing itself than waiting for confirmation on next day. around 3:20 if you confirm the pattern get yourself in.


The Engulfing Pattern: There are two types of engulfing patterns. One is bullish engulfing Pattern and another is bullish engulfing pattern. We need two trading sessions for these type of patterns.

Bullish Engulfing Pattern: When market is in downtrend means opening is less than previous opening and closing is less than previous closing then suddenly next day if opening is less than yesterday closing and closing is above yesterday's opening then it forms a bullish engulfing pattern.

Look at the below image TATA Steel chart:

So, here P1 is touching a new low as bearish trend and then next candle P2 is opening below P1, engulfing the whole P1 and closes above open of P1. After this trend is reversed towards bullish.

If engulfing candle (P2) also engulfs high and low shadow of previous bearish candle(P1) then this is considered as sure reversal sign.

Bearish Engulfing Pattern: Bearish engulfing pattern is just opposite of bullish  engulfing pattern. This appears when market in bullish trend and then suddenly in next trading session a candle opens up above the close of last trading session and closes below the open of last trading session.
Look at below TATA steel chart:

Here there is uptrend the suddenly P2 engulfs whole of P1 and trend is reversed towards bearish.

You can see in the right end there is also an bullish engulfing.
If P2 covers the shadow of P1 then it is considered as a more stronger sign of reversal as in above pattern.

If there comes a Doji just after bearish engulf it shows a catastrophic fall may fallow. Becasue as mentioned in previous post Doji shows a uncertainty in the market. In above figure also there is a Doji just after bearish engulfing of P2.

The Piercing Pattern and Dark Cloud Cover: Piercing pattern is same as Bullish or bearish engulfing with only one difference it does not engulfs the last candle as a whole but covers more than 50% and less than 100% part of the previous candle. Opening of Piercing candle in Bullish trend is above close of last trading session and in Bearish trend below the close of last trading session. Look at the another TATA steel Chart pattern.

In above chart you can see both bullish piercing and bearish piercing pattern.

But if you are a bit less risk taker better go with engulfing pattern than piercing pattern.

Single Candlestick Patterns - Technical Analysis - 1

Marubozu :

Marubozu is a Japanese word which means "bald". It can appear anywhere in the chart.
Marubozu is either bullish or bearish.
Identification: It has no or very little upper and lower shadow.

• Bullish Maruzobu in uptrend shows trend continuation.
• Bullish Maruzobu in downtrend shows trend reversal.
• Bearish Maruzobu in downtrend shows trend continuation.
• Bearish Maruzobu in uptrend shows trend reversal.

Points to remember:

-  Stop loss is other end of the candle. Like:  In bearish candle stop loss will be open price.
-  If Maruzobu is extremely small or extremely large then one should avoid trading.

The Spinning Top:

Identification: Unlike Marubozu it has good upper and lower shadow with a small real body. Like below image -

At any particular time it convey indecision in the market. Both bulls and bears are equal in the strength.

If market is uptrend and spinning top appears it means uptrend either could be about to end or it will just taking rest and continue after this. same with downtrend.

Since chances of both the events 50-50, we can invest 50% of amount in the market and after confirmation invest rest 50%.

Points to remember:

Upper and lower shadow should be almost equal.

The Dojis:

Identification: Dojis are almost same as Spinning tops only with one difference that it has almost no real body. Open price should be almost equal to close price. (Below Image)

There are three types of Doji. All of them have vital information about wherever they appear.
Doji:  Just like spinning top it also shows indecision in the market. Generally it appears along with Spinning Top. If it appears along with Spinning Top at any trend then it shows the tendency of trend reversal.

Rest will be explained with the below pattern.

Paper Umbrella: 

Identification: Paper Umbrella have long shadow at one side and other side with almost no shadow. Look at the below image:

Body should be small and color does not matter with this pattern.

It has two different names based upon where it appears. If it appears during bullish trend it is called Hanging man and if it appears during bearish trend it is called Hammer.

So if you find a hammer in a bearish trend it shows that trend is about to end and bulls are entering in the market.

And if you find a Hanging man in a bullish trend then it shows that bullish trend is about to end and soon there will be trend reversal.

I would prefer Hammer over Hanging man while treading.

Points to remember: 

Body should be small and shadow must be more than 2x of body. 

The shooting star: 

Identification:  It looks like opposite Paper Umbrella. It gives a powerful reversal sign. Since Shooting star is a bearish trend so prior trend should be a bullish one.

Points to remember:

In this also Body should be small. and shadow must be more than 2x of the body.

---------This Will be all about Single Candlestick pattern--------