📈 Bullish Patterns (Buy Signals)

Indicate potential price rises and buying opportunities.

Bullish Engulfing

Appearance: A large green candle fully "engulfs" the previous red candle’s body.

Signal: Strong buying momentum, suggesting a trend reversal from bearish to bullish.

Confirmation: Look for rising volume to validate the reversal.

Hammer

Appearance: Small body with a long lower wick, forming after a downtrend.

Signal: Buyers are stepping in, hinting at a potential recovery.

Confirmation: Followed by a green candle closing higher.

Morning Star

Appearance: Three-candle sequence: red ➜ small Doji ➜ large green.

Signal: Shift from bearish to bullish sentiment.

Confirmation: Green candle closes above the midpoint of the first red candle.

Piercing Line

Appearance: Red candle followed by a green candle closing above the red’s midpoint.

Signal: Buyers overpower sellers, signaling upward momentum.

📉 Bearish Patterns (Sell Signals)

Warn of potential price drops and selling opportunities.

Bearish Engulfing

Appearance: A large red candle swallows the prior green candle’s body.

Signal: Heavy selling pressure, signaling a bearish reversal.

Dark Cloud Cover

Appearance: Red candle opens above the previous green close but closes below its midpoint.

Signal: Bullish rally fading; prepare for a downtrend.

Shooting Star

Appearance: Small body with a long upper wick, forming after an uptrend.

Signal: Buyers losing control; reversal likely.

Hanging Man

Appearance: Small body with a long lower wick, appearing at an uptrend’s peak.

Signal: Distribution phase; price drop imminent.

🔑 Key Insights for Traders

Never Rely Solely on Patterns: Confirm signals with volume trends (rising volume = stronger signal) and technical indicators like RSI or MACD.

Context Matters: Patterns are more reliable when aligned with the broader trend (e.g., a bullish hammer in a downtrend needs stronger confirmation).

Avoid False Signals: Combine candlestick analysis with support/resistance levels or moving averages.

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