Candlesticks (B)

Just as the name implies, it consists of a long white candlestick followed by a black candlestick which opens above the high of the white candlestick and closes well into the body of the white candlestick. It is considered to be a signal of a bear market and a reversal during an uptrend. The closing price of the black candlestick should fall on the lower half of the white, which is below the halfway line. The following day they should be confirmation of a small black candlestick which falls below the line not above.

This is also sometimes referred to as a Bearish Reversal, but the chances of it happening are less than Dark Cloud Cover above (37) and the effort is also weaker. Following an uptrend cycle, this pattern indicates a reversal. It shows a white candle in the uptrend is long enough, followed by a long enough black candle with the closing price equal to the closing price the previous day. The confirmation sometimes falls on the 4^th or 5^th day as opposed to the 3^rd day.

This indicates a downtrend, with one black candlestick longer than the other which shows that the downtrend is continuing. However, on day three, if a white candlestick appears but cannot reach up to half of the previous black candlestick, the downtrend is expected to continue and there is no need to have further confirmation. However, if the fourth stick is also black and under, the trend will be firmer.

This is also known as the Bullish Three Outside Up. The requirement is that following a downtrend, no matter long or short, a very small black candlestick, similar to (32) Black Spinning (p) of Allocution 5 appears. This is followed by a bigger white candle, similar to (24) Engulfing Bullish Line, and a third white candlestick, which should be above the midline of the first two days in order to form this pattern. However, when the first day is a (12) (a) Doji Small Star is also acceptable.

It is also known as Bearish Three Outside Down. The vital factor here is that following an uptrend, regardless of its length, a very small white candlestick appears, similar to (30) White Spinning Bottom of Allocution 5. Then a bigger black candle similar to (21) Engulfing Bearish Line, with the third black candlestick appearing under the middle line of the first two days to form this Three Outside Down. In such a case when the first day is a (12) (a) Doji Small Star is also acceptable.

Sometimes this is also known as “Morning Glory”. After a period of falling, two black candlesticks appear, both with the same closing price: the same bottom and only of a short shadow line underneath. The second stick is engulfed by the first, but the third stick is a Rising Hammer. This means that the long dark night has passed away, and sunshine is coming at last. When the third stick is just a white Spinning Top, the power of rising is considered weaker than a Rising Hammer.

Sometimes it is also known as the “Extended Dark Night” and often called Complex Engulfing Pattern, for it shows the first candlestick engulfing the second, and the second engulfing the third. But what does this mean? It is a reversal signal, and if formed with 3 sticks this indicates that that its power will be stronger than if it was formed with two sticks. However, the black sticks are shortening day-by-day which means the power of falling is weaker and reversal is quite near. Do not confuse this with Descending Triangle for it needs 2 to 3 months for formation and not just 3 days.

Sometimes this is also known as an “Unknown Future”. It is a variant of (35) (a) denoting an unsuccessful turn. Beware that there are plenty of reversal signals, some are successful and some unsuccessful. The first stick is a big white candlestick, the second is tapered, and the third pops up but in an Anti-Rising Hammer. This indicates that the first day was positive, however, day two hasn’t gone well, whilst the third day may not have started well, but has proven to be good at last. Therefore, it’s important to refer to practical market situations to see the further development, which can be on either side.

Sometimes it is also known as “Marching to Light” or “Hallo Sunshine”. After a series of drops, there come three white candlesticks, each one growing larger than before, but starting at the same point, which reflects the opening price, however, indicating that the closing prices reach higher every day. It is also a Complex Engulfing Pattern, which shows that after market close good news has been digested and therefore the pattern has returned to original opening price but will nevertheless still soar up by closing. It denotes that the future rising trend will be promising, for sellers already have been kicked off.

Tweeter means a loudspeaker with a high tone who grabs peoples’ attention. Whilst it may not be important, this is a warning not to be neglected, for it denotes a minor change. At present it is minor, but in future could be more important. This indicates that following a several days high, the top is the same, however the low is higher, and the effort is diminishing. This depends on how it is formed with various black and while sticks and also other patterns.

What happens if the third stick of a Tweeter Top is black? If it is a flat top where all of the highs are the same, it denotes a small resistance is present and waiting for breakthrough. When the low is higher day-by-day it should be treated as a rising trend at first, however, if it’s unable to go further up and the closing price is lower, it shows that the rising power is weaker and may even turn down. This can be an indication that the resistance is stronger and hard to break. Regardless of this and whether the breakthrough is success or not, it is a minor trend.

When 3 black candlesticks group together with a flat top and each closing price is higher day-on-day, it is a good trend but not as strong as (46) (a), because when (48) precedes the (46), this shows an ideal trend of rising and the forecast is considered more reliable than just a single pattern.

This is a stronger reversal pattern than (48) (c) but is at the bottom of the wave and indicates that during the first two days following opening, the price dropped, however, on the third day it rose, indicating that the turning point is ever nearer as even the tops are the same.

The white stick is a pigeon and therefore leaving the dark area indicates flying back home. It comes out after a series of falling and a black candlestick, however, beware that this stick should not be too big, and its volume should not be too large. It also shows a small candlestick even lower than the shadow lines which is engulfed by the previous. The third day need to have a large gap with larger transaction volume. If this is the case, the trend will continue to rise, otherwise it could turn downwards or morph into another pattern.

This star and the following stars are actually short crosses where their vertical length roughly equals their horizontal width. For this pattern (51), when in a downward trend the first stick is a long black candlestick, the second is a Doji below the previous candle body and the highest price is above the previous candle low price. The third is a white candle with the body totally above the previous star. Beware that the closing price should be above the mid-point of the first candle body. It is known as Bullish Morning Doji Star and considered as a reversal trend.

It is actually a variant of the previous (51) (a) pattern, but the previous Morning Doji shows that the market is indecisive, and transactions are normally shrinking, however, this (b) pattern means the transactions are more active than previously. Market sentiment is more aggressive and in a cautious optimistic manner. Therefore, it can be said that this is more reliable than the (a) pattern. The second stick should refer to (31) and (32) Black Spinning Top or Bottom or Standard for further observations.

It is also known as Bullish Abandoned Baby, a three-bar reversal pattern that develops after a down leg. It shows a gap has occurred and is followed by a Doji small star, meaning that an upward gap then occurs on the next bar leaving the Doji “abandoned” at the low. Beware that abandoned baby means that it has been rejected by its parents – a black and a white stick with the same bottom, one with a Falling Window (35) and another with a Rising Window (36) which equal one another. But the third white stick must be long enough, and the gap must be wide enough.

It is also known as Bearish Abandoned Baby, a three-bar reversal pattern that develops after an up leg. When a gap occurs and is followed by a Doji small star. A down gap then occurs on the next bar leaving the Doji “abandoned” at the top. Beware that abandoned baby means that it has been rejected by its parents – a black and a white stick with the same bottom, one with a Falling Window (35) and another with a Rising Window (36) which equal one another. But the third black stick must be long enough, and the gap must be wide enough.

This is also known as Bullish Three Star Doji. It is a simple pattern of Three Doji Stars, however, unlike a typical reverse pattern which typically needs a white stick, this doesn’t. Normally a Doji star denotes that the market sentiment is indecisive or directionless, and 3 stars grouped together seldom happen when it is near the support line. Either a previous low or different kind of average line will be more indicative. It is also known as Three Star Bottom.

It is also known as Bearish Tri Star Doji. Basically, it mirrors (55) Star (e) and focuses on the gap, which should be wide enough but not too wide. Additionally, it’s important to observe the previous range and serval highs or the various average lines which we’ll discuss in the next Allocutions. As for the star itself, its horizontal lines which reflect the opening and closing do not need to be in the middle but can be slightly clinging up or down. However, they should not be on top or bottom of the vertical sticks. It is also known as Three Star Top.

The term Sandwich is easy to understand – it denotes two identical sticks either side of a middle stick which is different in color and size. This shows a reversal trend. In an uptrend there are three major sticks – the first is a white candlestick, long enough and with a closing price near the all-day high. The second stick is a black stick with an opening and high price lower than the first one, and the closing price lower than the previous opening price. The third white stick engulfs the second totally with a closing price the same as the first one. It is a bearish signal, however, it’s wise to wait and observe the closing price under the third to confirm this trend.

It’s a mirror of the above (57). The low of the first and third should be the same, and the third black stick should engulf the second white candlestick. The breakthrough needs confirmation, but not necessarily on the fourth stick, and sometimes will be on the fifth or sixth stick. When it doesn’t appear on the fourth stick, one should be cautious that the patterns do not transfer to another format. It’s better to cope with Technical Indicators which will be presented in the coming Allocutions.

It is also known as Three White Flowers or Three Small White Flowers. After a bearish or a sluggish trend which goes horizontally, if there is a sign that three small white candlesticks are going up one by one like a staircase, all high, low, open and close are higher than previous, it shows the rising power is aggregating gradually and paving a beautiful and brave path for the future. The most ideal pattern is that the price opens in middle of the previous.

It is also known as Three White Trees or Three Big/Giant White Trees. It’s a variant of the previous (59) pattern. Of course, knights are bigger and more important than soldiers, just as trees are larger than flowers. Therefore, the rise can be expected larger than the previous (59) pattern. These three large white candlesticks only show a true pattern at the bottom or midway, if it is at top of a wave or the candlesticks are too long, you’d see a counter effect because of meeting extremes. The ideal pattern is also in the shape of a ladder, with the opening price halfway. As a rule, most of these patterns need confirmation, meaning the coming stick should continue the trend and be the same color to confirm, regardless of whether it’s black or white, up or down.

It’s a variant of the previous two patterns of (59) and (60). It appears after a long trend of rising, and denotes the end is near, but not necessarily now as the rising power is diminishing. As standard there are two white candlesticks large which aren’t that large – the first and second are of same size, the second opens about halfway through the body of the first, but the third white stick is diminishing and can be in form of Spinning Top (29), Spinning Bottom (30), or Doji star (12) (a). It is treated as a reverse signal of an uptrend.

This is a variant of the previous three patterns of (59), (60) and (61). After a series of uptrend, the rising power becomes weaker day-by-day. The next two days are white candlesticks with each closing above the previous day’s close and having an opening within the range of the previous day’s body. The most important point is that the last two days have long higher shadows than the first, and similar to a rising hammer seen in (5). This denotes the end is near, even if there is still rising.

Patterns (63) to (66) are mirrors of (59) to (62), respectively. The focus that Three White Flowers (59) should be on the ground means that after a falling trend of a sluggish range running horizontally, Three Black Crows (63) should be on the tree, indicating the top of a wave, however, requiring that one crow is lower than previous or else it is not such a pattern. Crows must be small relative to the tree; therefore, these three black candlesticks should not be too large and comparatively be the same small size. Thus, it denotes a longer but slower trend of downfall.

The Three Black Crows (63) and Three White Flowers (59) are smaller in size, but eagles of course are larger than crows.  However, Three Black Eagles also known as Three Black Knights and should be high in the air which comes on top of a wave where three big black candlesticks which are large enough, lead the fall. This means the falling trend will be deeper and longer than (63) and come earlier than (63). But should not be too long, or else when extremes come, it will bring a rebound as in (60) Three White Knights which is a mirror pattern of this. Beware that in these patterns, the shadow line of the last candle is very decisive. That is when it is an Anti-Falling of Falling Hammer and can decide the speed of confirmations.

Here it’s better to explain the strategy of stop loss and buying in than repeating the mirror pattern of (61). After a falling trend two similar black candlesticks denote the power is still great, but the third has diminished the power, so when the fourth days comes if the price is on the upper half of the third stick, then it is a buying signal. But, be sure that the stop loss is the lowest shadow line level of the third dayΩ. This also applies to the mirror pattern of (61) and other similar patterns.

Some call this the Bearish Advanced Block, because it stops the fall, however, some call it the Bullish Advanced Block, for after the block it may go bullish. The term isn’t that important, however, the writer uses the term of Advance Block (Bearish to Bullish), when readers may notice other people using the previous terms or even other names. The important thing here is to concentrate on the essence, as everyone can invent more beautiful names. This is a mirror pattern of (62). Mind the buying signal Σ and stop loss Ω are as in (65).

This is a trend of continuation and not reverse. In a downtrend you see two black sticks – the low shadow line of the first can overlap the high shadow line of the second, but the body of the second cannot overlap the shadow line of the first. The third white candle opens within the body of the second and closes within the body of the first. The first candle indicates a downtrend and second reconfirms, but the third is a rebound to fill the gap and means the down trend will continue hereafter.

This is a mirror pattern of item (67), and it’s important for investors to understand the psychological status of the market. The rally of uptrend continues on the first candle in a healthy session, with the close well above the opening – generating a wide range real body. This increases the bull’s confidence to generate the second candle, with the third being a profit-taking candle. In an uptrend, a healthy continuation will only occur when profit-taking is completed. This is the essence of items (67) and (68).

This pattern develops from item (67) and (68) and is a continuation pattern. Some would say (69) is also a variant of this. There is a clearer gap here, thus is also known as Real Gap. The level between Σ and Ω is known as Tasuki Gap. When this gap is filled, it does not indicate a reversal, but rather a continuation, because profit taking has been completed. Be aware that the gap must be wide enough in order to let the digestion on the third stick occur thoroughly, but not too wide or else it will lead to a counter effect that is too large to fill.

From (67) to (69) are of the same category in mirror patterns or variants. The last stick should simply be the opposite color of the second, meaning that before and after the gap should be different colors. This means it’s strong enough for profit-taking no matter how long or short orders and a gap filling is for continuation and not reversal. The third stick that is after the gap must cover the upper half and lower half of the body before the gap regardless of whether there are white or black sticks. It is also known as Real Gap.

This is a five-stick pattern of continuation, or rather renewal. In a bullish
trend, you see Three Small Crows as in item (63) and as previously pointed out, it needs a selling signal to confirm, which doesn’t appear. Instead, on the fifth day there is a big white candlestick. In such a case, the period of Three Small Crows is known as consolidation, one that is a little indecisive, but actually digests the buying orders of the first white candlestick, or in the previous uptrend. Beware that the variant is that three black sticks can sometimes develop into four or five, so buying must not be under major previous resistance. Buying signal is by the end of fifth closing at Σ or the sixth opening, and stop-loss at fifth opening of Ω.

This is a variant of the above (77) pattern, but denotes a stronger rising
power. The second stick jumps up and turns out to be Three Small Crows of (63), since the rising power is stronger. Therefore, the consolidation period sometimes may be longer, meaning it may have four or five, or more, small sticks in the period of indecision, when the period is longer, the small sticks may not be in same color, so in such a case, the shadow line or the wick will be more indicative than the color. If there are five small candlesticks, the first two are Black Spinning Bottom as in item (32), and the fourth is Black Spinning Top as in (31) or in form of a small Anti Falling Hammer of pattern (3), meaning the trend will come soon. Buying signal at Σ, selling at Ω.

Even though this is a mirror pattern of Rising Three Method (77), mind that three white candlesticks are not the same as the above, it is in the form of the Funnel Shape of Allocution 4. It can be in the form of Three White Flowers or Soldiers of (59) or in the varying form Funnel Shape. Anyway, this is a form of continuation or renewal, showing the market after a short period of consolidation and restarting the downtrend. When the Funnel Shape appears, it means the fifth stick will come very soon and very strong. Mind that the buying signal is still at Σ, but the stop loss should take care, it is not at the end of Three White Flowers or Soldiers of (59), but at top of the fifth black stick which is Ω.

It is also known as Inverted Mat Hold or Reverse Mat Hold – a mirror pattern of (78) Bullish Mat Hold. Mind that the three small sticks can be in any form – the standard form of Three White Flowers (59) or the Trumpet Shape of Funnel Shape of Allocution 4, and you may even witness the further development of four or five sticks. Even if in individual pattern of Spinning, it can have Spinning Top or Bottom, Black or White altogether in four formats as shown in (29), (30), (31), (32) of Allocution 5. One more point to be aware of is the selling signal is at Σ the close of the fifth stick or open of the sixth is it is still around that price. The stop-loss is at the top of the fifth stick Ω which is the opening price and not at top of the fourth stick.