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Saturday, July 18, 2020

Double candlestick patterns part -2 -swing trading strategy

Double candlestick patterns confirms the trend reversal & that reversal is going to sustain over a period of time. These patterns may appear everywhere in the chart which may be false signals.But if these patterns appear at overbought or oversold levels trend change may be confirmed.
Tweezers bottom -

This candlestick pattern comes at the end of uptrend & confirms the bearish trend reversal.
This is couple of candles which are same but first candle is green & second candle is red.
It may be couple of shooting star as shown above. The first candle is green having small body & long tail. The second candle is red shooting star having small body & long tail.
The condition for tweezers bottom is that, high of both the candles should be either equal or high of second candle should be less than the first candle. The second candle may open gap-up & close above the open price of first candle.
Necessarily, it is not required that the candles should be shooting star. It may be couple of spining top, marubozu or doji. The condition is same. The first candle should be green & the second candle should be red. The high of both the candles should be equal or the high of second candle should be less than the first.
If such a pattern appears at overbought level, it may be the beginning of downtrend.
Tweezers top-

This is opposite of tweezers bottom. It comes at the end of downtrend confirming bullish trend reversal.
The first candle is bearish (red). The second candle is green. The low of both the candles should be equal or the low of second candle should be little higher than the first candle that means within the low of first candle.
The body of second candle may open gap-down or may close above the opening of first candle.
It is not necessary that the candle should be hammer. It may be shining top, marubozu or doji. The condition is that the low of both the candles should be equal or low of second candle should not be below the first candle & the first candle should be red & second candle should be green.
Both the candles collectively shows the war between buyers & sellers. Sellers are dominating in the first candle but buyers succeed in the second candle to make the candle green & not letting the sellers to drag the low price lower than the low of first candle.
Bullish kicker-

This candlestick pattern comes at the end of downtrend. The first candle in this pattern is long bearish(red) candle. The second candle is bullish (green) & opens totally out of the body of the first candle. The opening of second candle may be at the opening of first candle or above.
If such a pattern appears at oversold level, it clearly indicates the bullish trend reversal.
Such a huge gap-up opening occurs due to buyers confusions to enter into the trade. Sellers drag the price to a value which is unworthy. May be any good news about the particular stock on that day or market being abruptly bullish due to certain conditions such a phenomenon occur.
Bearish kicker-


This pattern appears at the end of uptrend. The long bullish candle (green) occur at the end of ongoing bullish trend. Buyers don't agree with this price. The next day the candle opens gap-down. The opening of next candle is below the opening of first candle, thus totally out of the body of first candle. Such a huge gap-down open is called kicker & that is totally in the opposite direction.
If such a pattern appears at overbought level it indicates strong downtrend which is going to prevail over a period of time.
Piercing line pattern-
It indicates bullish trend reversal.
This double candlestick pattern comes at the end of downtrend. At the end of downtrend a long bearish candle (red) occur due to high selling pressure. The second candle opens gap-down reflecting the sellers intention to drag the price still lower. But buyers deny this price & pull the stock price upward.
The close price of second candle should be between half of the first candle & below the opening of first candle.
The high of second candle should not be lower than the high of the first candle.
If such a pattern appears at the oversold level the possibility of bullish trend reversal increases.
Dark cloud pattern-

This pattern indicates bearish trend reversal.
It comes at the end of uptrend. When a prominent uptrend occur, at the end of uptrend a long bullish (green) candle occur. It may be green marubozu. The second candle opens gap-up clearly indicating the buyers intention to pull the price still upward. But sellers deny the price & the buyers which are holding the stock over a uptrend sells the stock. This selling pressure drag the price below & closes the stock below the midpoint & above the opening price of first candle.
The condition for dark cloud pattern is, the low of second candle should be above the low of first candle.
If such a pattern appears at overbought level & the volume of the second candle is more than the first candle a bearish trend reversal is possible.

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