We learnt about candlestick analysis and mainly about Engulfing pattern, DOJI, Morning Star, Evening Star, Piercing Pattern, Hammer/Hanging man.
- : Candlestick analysis is the Japanese way of understanding demand and supply and adopted later by western. Candlestick analysis provides short term trend analysis( 3 to 4 days) and studies in detail based on the daily candlesticks patterns .
- : Candlestick analysis can be used for weekly( 3 to 4 days) forecasting, i.e buying and selling within the week time.
- : Weekly trader can use the candle stick analysis and the trading volume might increase but it is not compulsory.
- : In the candlestick view, after significant rise or fall, when the previous day body is completely covered by today’s body with the reversal colour and significant volume, then it can be identified as engulfing pattern. Condition to quality Bearish engulfing: Increase in price trend observed for past few days & Latest Red body is covering the previous day green body with significant trading volume. When to Sell: Create short position when the price goes below latest red body’s lowest price Condition for bullish engulfing: Fall in price trend for few days observed & Latest green body is covering previous red body with significant volume. When to Buy: Create long position when the price goes above latest green body’s highest price.
- : In the candlestick view, after significant fall, when the current day starts below previous day’s lowest point and cover up more than 50% of previous day’s body with green colour and significant volume indicates the Piercing Pattern(Bullish in this case). Condition to qualify bearish piercing: Increase in price trend observed for past few days. Latest Red body starts above the highest of previous day and covers more than 50% of previous day’s body with significant volume. The lower tail is small in size. Condition to quality bullish piercing: Recent price fall trend observed & Latest Green body starts below the lowest of previous day and covers more than 50% of the previous day’s body with significant volume. The upper tail should be small..
- : DOJI means neutral and it is a powerful and reliable candlestick pattern. DOJI appears after significant rise or fall in price with high volume. This candlestick pattern will be in the form of star, where the starting and ending price of the day is almost the same. DOJI is the indication of reversal trend and can be used for creating long/short position based on whether it is bullish or bearish
- : Bullish and Bearish DOJI is called as morning and evening star by western. the star should be seen after rally and not at sideways. Star indicates the reversal pattern. Morning Star: After significant price fall, if DOJI(starting and ending price is almost same at the center) appears with green body and high volume, it can be identified as morning start. Evening Star: After significant increase in price if DOJI(thin body) appears with red body and high volume, it can be identified as evening star
- : Hammer- When there is a continuous fall in trend then a body is formed with lower tail is two times its body, greenish and the upper tail is little visible or not visible then it is called Hammer and it is a bullish. Hanging man-When there is bullish, then a red body is formed with upper tail is taller with two times its body and redish and lower tail is not visible or little visible then it is a Hanging man (reversal of Hammer). In both the cases volume is high, when these patterns form.