If the upper shadow on a down candle is short, it indicates that the open that day was near the high of the day. A short upper shadow on an up day dictates that the close was near the high. The relationship between the days open, high, low, and close determines the look of the daily candlestick.
- : Candlestick analysis gives us a detailed study of the open and close price also the high and low price and the colorful representation makes us easy to read and understand. It is very effective as a daily basis and also more effective in weekly basis. Evaluation using candlestick is more effective to predict for a short term like a weeks time.
- : Candlestick analysis can be used for weekly forecasting, i.e buying and selling within the week time
- : candlestick is for weekly basis it is useful for a short term trader and volume is important for Doji, hammer and hanging pattern because volume helps to understand price movements.
- : This is the case where a candle stick completely covers the body of the previous day candle stick. Conditions to Qualify :- 1. There should be continuous trend (bullish or bearish) atleast 3 to 4 days and a sudden reverse pattern. 2. There should be an engulfing pattern in the reverse point. 3. High volume should be there. When to buy and sell :- 1. the next day, at the price above the highest point of the current candle stick. 2. Stop loss , at the lowest point of the current candle stick. 3. sell :- buy price + (buy price – stop loss)
- : after a uptrend if a red candle stick is formed covering more than half the body of the previous candle stick, it is called piercing pattern. We hay sell the stock then. Similarly vise vera during a downtrend.
- : DOJI means Neutral. When a thin, star like body appears in a candlestick chart, it is called DOJI. It actually indicates that a stock opens and closes at almost the same price on a particular day. It appears rarely but it is very powerful. DOJI with high volume is an indication of Trend Reversal. We can make use of DOJI by creating either Long or Short position based on whether the trend in negative or positive respectively before DOJI.
- : Morning star: When a DOJI is formed after bearish trend, then it is morning star, we can buy. Evening star: When a DOJI is formed after bullish trend, then it is evening star, we can sell.
- : Hammer: When the opening price and closing price are near the highest price, then a hammer shaped candlestick is formed and it is green in color We can buy. Hanging Man: When the opening price and closing price are near the lowest price or highest price, and if it is red in color then it is hanging man. We can sell.