Financial Markets

Multiple Candlestick Patterns

The first step after completing single candlesticks is to learn how Multiple Candlestick Patterns. Therefore, without wasting time let us jump straingt to multiple candlestick patterns.

Market Trends

There are 3 types of market trends in the share market or any market where we see the price dependencies on volume and time. Firstly, read the article on trends because the article will help us in understanding the candlestick patterns.

PDF of Technical Analysis for Dummies – A Book on Technical Analysis where you can find the right psychology behind candle formation.

Multiple Candlestick Patterns for identifying downtrend

Firstly, in order to predict a downtrend we must first know what is an uptrend. Because downtrend starts at the top of an uptrend. The strength of a downtrend is determined by the sharpness of the fall. Secondly, the market is in an uptrend therefore it makes sense to study bearish patterns.

List of Bearish Patterns

Bearish Engulfing

The pattern involves two candles one is a long green candle and an equally long red candle. As the name suggests in this pattern the green candle is engulfed by red candle upto 80% in a single day. For example we are using the share of GAIL India.

bearish engulfing
Bearish Engulfing
Bearish Engulfing - Multiple candlestick patterns - Bearish Engulfing

Shooting Star or Inverted Hammer

Shooting star is a very distinct pattern. It is formed at the top of an uptrend with a very long tail and small candle body. The color of the body is not important. A red candle following the shooting star indicate that the pattern is complete. Finally, we can see that shooting star pattern failed on the stock of HDFC ltd therefore we must test the efficacy of any pattern on a given stock.

Multiple Candlestick Patterns - Shooting Star
shooting star - Multiple Candlestick Patterns
shooting star

Evening Star

Another patter similar to a shooting star is the Evening Star. Where instead of a long tail we see the formation of a hammer candle in between the green candle and a red candle. The red candle opens at the lowest point of hammer and covers more than 50% of the green candle.

Evening Star
Evening Star

Three Black Crows Multiple Candlestick Patterns

This is the most common trend continuation pattern. This pattern is seen on the charts when 3 red candles on daily chart are formed back to back in a row. In the chart of Reliance Industries we can see that for multiple instances this pattern is observed.

Three Black Crows - Multiple Candlestick Patterns
Three Black Corws
Multiple Candlestick Patterns - Three Black Crows

Hanging man

Hanging man is the pattern in shape is just the opposite of Shooting Star pattern. The tail of the candle is longer in the downward direction just like an umbrella. Imagine a hammer in the uptrend and there you have a hanging man.

Hammer in downtrend Hanging man in Uptrend
Hanging man Doji and Spinning Tops
Hanging man Doji and Spinning Tops

Dojis and Spinning tops are also bearish when they are formed at the top of an uptrend.

Tweezer Top

Two candles of opposite colore one red and one green when formed at the helm of an uptrend is known as Tweezer Tops. The highest point of the candles should be kept as a stop loss and a selling position can be taken at this point.

Tweezer Top
Tweezer Top

List of Bearish Mutiple Candlestick Patterns

Firstly, we would like to thank alphaexcapital for preparing such a concise chart.

Bullish Mutiple Candlestick Patterns

Firstly, bullish patterns represents change of direction. Secondly, bullish patterns mark the end of a downtrend and the beginning of an uptrend.

Bullish Engulfing Multiple candlestick patterns – 2 Candles

Bullish engulfing involves many red candles of a downtrend and a sudden emergence of a big green candle indicating trend reversal. The length of the body is of a green candle indicates the strength of the pattern. Longer candle implies a stronger pattern.

Bullish Engulfing
Bullish Engulfing

Morning Star – Multiple candlestick Patterns – 3 Candles

A morning star pattern involves three candlesticks in a downtrend. The middle candlestick has a long shadow and in most cases this candle is a hammer.

Morning Star - Multiple Candlestick Patterns
Morning Star

By Kanishka Singh Rathore

  1. Engineer
  2. Financial Planner
  3. Editor

Leave a Reply

Your email address will not be published. Required fields are marked *