Some of the most well known are engulfing patterns, dojis, and umbrella lines. Below are, first, an example of a bullish engulfing pattern and, next, how it foretold a change in trend. The most popular are the Inverted Hammer, Hanging Man, Bullish Engulfing, Bearish Engulfing, Piercing Pattern, Dark Cloud Cover, Doji Star, Shooting Star, and Harami Cross. The data suggests a Bearish Engulfing candle can occur during an uptrend or downtrend and can be a reversal or continuation pattern. The image below shows four Bearish Engulfing candles, top-4 best candlestick patterns for 2025 three of which occur during a downtrend, thus accelerating the price decline, and one occurs during an uptrend, signifying a reversal.
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Three consecutive Doji at top of uptrend signaling strong bearish reversal. Two or more candles with matching highs indicating potential bearish reversal. Small body at bottom with long upper shadow; indicates bearish reversal at uptrend.
- The Inverted Hammer also appears in a downtrend, but its shape is flipped.
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- A Doji Candle is a distinctive pattern in candlestick charting used in technical analysis.
- Every candle on a chart is more than data; it is evidence of a battle between buyers and sellers.
Candlestick Patterns Traders Follow for Smarter Moves in 2025
The Inverted Hammer typically appears at the bottom of a downtrend, indicating a potential shift in the price trajectory. It signals a bullish sentiment, denoting that the market is trying to increase prices, as the extended upper wick indicates. However, the sellers regain control by the close of the trading period, pushing the price down to close near the opening level, thus creating a small body at the bottom.
Bearish Engulfing
The shape is strong when it occurs following a deep downtrend and at strong supporting price levels. Traders look for an improvement in trading activity in the third one for a reflection of a reversal. The direction change in momentum reflects the future direction change, possibly in a bullish direction. The shooting star is a bearish single-candle formation appearing after rallies.
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The three black crows are made up of three consecutive bearish candles with small wicks, symbolizing strong sales momentum. All three candles open in a preceding candle’s body and then close below, symbolizing continuous bearish momentum and potential for a continued decline. The evening star is a three-candlestick reversal and a sell signal and is a long bullish candle, a small-bodied (which can be bullish or bearish) one, and a long bearish one.
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Entries can be taken after the third candle closes, with stops below the first candle’s low. Traders often avoid the setup if candles are overextended far from moving averages, as that may signal exhaustion. Buyers were in control at first, then momentum paused, and finally, sellers stepped in with strength. It’s often found at market tops, signalling that an uptrend is losing steam.
For best results, always combine patterns with other analysis, such as key support/resistance levels or trend lines, for confirmation. Likewise, a bearish pattern with increasing volume may confirm stronger selling pressure. Patterns can be single candlesticks or combinations of multiple candlesticks, each providing unique insights into market psychology and potential price movements.
- This makes bearish engulfing one of the candlestick patterns every trader must know for risk control and timely exits.
- The piercing line candlestick pattern is a two-candlestick formation signaling a potential bullish reversal.
- Stops are placed above the small candle’s high, while targets are set at nearby support levels.
- Prior to taking any action with a candlestick pattern, confirm the current direction of the trend.
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Explore all 41 candlestick patterns organized into bullish and bearish with detailed explanations to help you master market signals. A morning star is a three-candle reversal pattern suggesting a bottom. The piercing line features a bullish candle that closes above the midpoint of the prior bearish candle, signaling recovery.
This pattern suggests that the downward momentum is weakening, and buyers are starting to step in. This indicates that despite selling pressure driving the price down, buyers stepped in to push the price back up. The implication is that the downtrend may be nearing its end, and a potential uptrend could follow.
The psychology behind it is that sellers tried to continue the downtrend, but buyers entered with enough strength to overwhelm them completely. This written/visual material is comprised of personal opinions and ideas and may not reflect those of the Company. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance.
It is seen when a bullish one is followed by a bearish one opening at a high price but closing below the first one’s midpoint. It is a signal of sellers gaining control and an unsteadiness in an uptrend. The first one reflects a sustained sales drive, and the second one reflects a strong re-entry of buyers. Increased trading activity in the second one reflects confirmation of success in the shape. The bullish engulfing shape is strong when it occurs at strong supporting price levels and in a long downtrend, reflecting strong demand. Trading with Japanese candlesticks is not about competing with technology but complementing it.
Each of these patterns has unique characteristics that can indicate potential bullish breakouts. When trading this pattern, traders should look for entry points near resistance or support. Traders can also wait for a confirmation candle before entering a position. This helps reduce the risk of false signals and non-profitable trades.
