35 Powerful Candlestick Patterns in the Stock Market

21 Aug 2024
9 mins read
By: BlinkX Research Team

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Candlestick chart patterns are technical tools that outperform typical open, high, low, and close (OHLC) bars or simple lines connecting closing price dots. Candlestick Patterns create patterns that anticipate price direction once finished. Candlestick patterns are used to anticipate future price changes. Candlestick designs are created by arranging two or more candlesticks together. Candlestick chart patterns work best daily. The theory is that each candle represents a complete day's worth of news data and price activity, which is why candlestick patterns benefit long-term or swing traders more.

In this article, we will go over all 35 powerful candlestick patterns, but first, let us learn how to interpret candlestick charts.

35 Candlestick Patterns

Candlestick patterns which include bullish and bearish reversal, and continuation formation have become essential for the investors and traders that help predict market movements. Below are 35 powerful candlesticks patterns presented in a table.

Pattern Type	Pattern Name	Description
Bullish Reversal Pattern	Hammer	This happens when the price trade gets lower from its original price but gets too close near the opening price, with a lower shadow at least twice the size of the body.
	Piercing Pattern	This is made by two candles after a downtrend, where the second bullish candle closes more than 50% compared to the earlier bearish candle.
	Bullish Engulfing	Two candles where the second bullish candle engulfs the body of the previous bearish candle, indicating a trend reversal.
	The Morning Star	Three-candle pattern indicating a bullish reversal: bearish first candle, doji second, and bullish third candle.
	Three White Soldiers	Three consecutive long bullish candles indicating a reversal of a downtrend.
	White Marubozu	A single long bullish candle with no shadows, indicating strong buying pressure and a potential trend reversal.
	Three Inside Up	A three-candle pattern: bearish first candle, small bullish second candle within the first, and a long bullish third candle confirming reversal.
	Bullish Harami	Two candles where the first bearish candle is followed by a smaller bullish candle within the range of the first, signalling a reversal.
	Tweezer Bottom	Two candles with equal bottoms, signalling a reversal of a downtrend.
	Inverted Hammer	Appears at the bottom of a downtrend with a small body, long upper wick, and short lower wick, indicating potential reversal.
	Three Outside Up	Three candles: bearish first, bullish second engulfing the first, and a third confirming bullish reversal.
	On Neck Pattern	After a downtrend, a long bearish candle followed by a small bullish candle closing near the previous close.
	Bullish Counterattack	Two-candle pattern predicting a reversal in a downtrend, with the second bullish candle closing above the first bearish candle's close.
Bearish Reversal Pattern	Hanging Man	Forms at the end of an uptrend with a small body and long lower shadow, indicating a bearish reversal.
	Dark Cloud Cover	Two-candle pattern with a bearish second candle closing below the midpoint of the first bullish candle, signalling reversal.
	Bearish Engulfing	Two candles where the second bearish candle engulfs the first bullish candle, indicating a trend reversal.
	The Evening Star	Three-candle pattern: bullish first candle, doji second, and bearish third candle indicating reversal.
	Three Black Crows	Three consecutive long bearish candles signalling a reversal of an uptrend.
	Black Marubozu	A single long bearish candle with no shadows, indicating strong selling pressure and potential reversal.
	Three Inside Down	Three candles: long bullish first, small bearish second within the first, and a long bearish third confirming reversal.
	Bearish Harami	Two candles where the first bullish candle is followed by a smaller bearish candle within the range of the first, signalling a reversal.
	Shooting Star	Forms at the end of an uptrend with a small body and long upper wick, indicating a bearish reversal.
	Tweezer Top	Two candles with equal tops, signalling a reversal of an uptrend.
	Three Outside Down	Three candles: short bullish first, large bearish second engulfing the first, and a third confirming bearish reversal.
	Bearish Counterattack	Two-candle pattern predicting a reversal in an uptrend, with the second bearish candle closing below the first bullish candle's close.
Continuation Pattern	Doji	Indicates indecision with opening and closing prices almost equal, showing market uncertainty.
	Spinning Top	Similar to Doji but with a larger body, indicating market indecisiveness.
	Falling Three Methods	Five-candle bearish continuation pattern with two long bearish candles and three short bullish candles in between.
	Rising Three Methods	Five-candle bullish continuation pattern with two long bullish candles and three short bearish candles in between.
	Upside Tasuki Gap	Three-candle bullish continuation pattern with two long bullish candles and a gap up between them.
	Downside Tasuki Gap	Three-candle bearish continuation pattern with two long bearish candles and a gap down between them.
	Mat Hold	Continuation pattern with a large bullish/bearish candle, followed by smaller candles countering the trend, then a large candle resuming the trend.
	Rising Window	Two bullish candles with a gap between them, indicating strong buyer momentum.
	Falling Window	Two bearish candles with a gap between them, indicating strong seller momentum.
	High Wave	Indecision pattern with long upper and lower wicks and small bodies, indicating market uncertainty.

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35 Candlestick Patterns
Candlestick Patterns
Bearish Candlestick Pattern
Continuation Candlestick Pattern
How to Read Candlestick Charts?

Candlestick Patterns

These all are bullish candlestick patterns:

1. Hammer Candlestick Pattern:

A Hammer candlestick pattern is a price pattern in candlesticks that occurs when a securities trade much lower than its initial price but rises within a period close to the opening price. This design is known as the hammer candlestick pattern. In this design, we see a hammer-shaped candlestick with a lower shadow that is at least double the size of the actual body. The candlestick body reflects the difference between the starting and closing prices. The shadow depicts the peak and low periods.

Bearish Candlestick Pattern

These all are the bearish candlestick pattern:

14. Hanging Man Candlestick Pattern:

The Hanging Man is a single candlestick pattern that appears after an uptrend and indicates a bearish reversal. The real body of this candle is tiny and located at the top, with a lower shadow that should be twice the size of the actual body. This candlestick design has minimal to no top shadow. Hanging Man is a single candlestick pattern that occurs at the end of an upswing. This candlestick design has no or little top shadow. The psychology behind this candle formation is that the prices opened, and the seller pushed them down. Buyers suddenly entered the market and drove prices higher, but they were unsuccessful, as prices closed lower than the starting price.

Continuation Candlestick Pattern

Here are the continuation candlestick patterns:

26. Doji Candlestick Pattern:

The doji pattern is an uncertain candlestick pattern formed when the starting and closing prices are about identical. It forms when both bulls and bears compete for price control, but none succeeds in acquiring complete control.

How to Read Candlestick Charts?

Candlestick charts started in Japan 100 years ago before the West developed bar charts and point and figure patterns. In the 1700s, a Japanese trader named Homma introduced that rice prices were affected not just by supply and demand but also by traders' emotions. This made the creation of candlestick charts.

A daily candlestick chart shows a security’s open, high, low, and close prices for the day. The wide, rectangular part of the candlestick, called the "real body," represents the range between the opening and closing prices.

Bearish Candle: When the real body is filled (black or red), it means the closing price was lower than the opening price. This shows that prices opened higher, then fell, and closed lower.
Bullish Candle: When the real body is empty (white or green), it means the closing price was higher than the opening price. This indicates that prices opened lower, then rose, and closed higher.

The wicks, also known as shadows, are the thin vertical lines that show the high and low prices during the trading session, and they are located above and below the true body.

Upper Shadow: Shows the highest price reached.
Lower Shadow: Shows the lowest price reached.

Together, the real body and shadows give a clear picture of trading activity and investor sentiment during a specific time period, making candlestick charts a valuable tool for market analysis.

Conclusion
Candlestick patterns in the stock market offers investors a practical approach to to understand the market movements and lets the trades assume price movements. They reveal trader emotions and their potential market direction through their regular charts. It helps traders assume future price fluctuations which are based on historical data and price activity.

These patterns specifically become useful for long-term and swing traders, who benefit from day by day data analysis. Getting to know candlestick charts improves the traders market analysis skills and improves their ability to assume and can revert to market movements. Understanding these charts, from bullish reversal to bearish continuation, has become essential for going with the market trends and developing effective trading plans. .

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FAQs on Candlestick Patterns in the Stock Market

Traders may profit from shifts in market sentiment by identifying inside candles on a 15-minute timeframe chart and trading in the direction of the breakout.

The Concealing Baby Swallow candlestick design is among the most unusual.

A short upper wick on a red candle indicates the stock opened around its daily high. In contrast, a short upper wick on a green candle indicates that the stock closed close to its daily high.

If the real component is positive, we anticipate a bullish candlestick; if it is negative, we predict a bearish candlestick; and if it is zero, we forecast a neutral candlestick.

This trading approach seeks momentum bursts on short-term, 5-minute currency trading charts that a market player may profit from before rapidly exiting as the momentum fades.