Reversal Patterns in Candle
Candlestick charts are looked upon as a way to find out the point at which the trend will end. It does not mean the trend will start reversing; it just means that it is the end point of bull or bear market. It may be possible that the market decides to move sideways. There could be many meanings of the same candlestick appearing at different points in the chart. Following are the famous formations and trends:
A candlestick with a very small or no upper shadow with a little body and the lower shadow is double the length of the body is called a hammer. It is named as a hammer because the overall shape resembles as a hammer. Regardless of the body as black or white, the candle must show a downtrend to be considered as a hammer.
Hanging man candlestick is the opposite of the hammer. It indicates the uptrend in the market.
Bullish Engulfing Pattern
In this pattern, the white body of a candlestick engulfs the prior day body. It does not matter if the shadows engulf each other or not, but the body should. Also, the trend should be bullish.
Bearish Engulfing Pattern
In this pattern, the black body of a candlestick engulfs the prior day body. It does not matter if the shadows engulf each other or not, but the body should. Also, the trend should be bearish.
Dark-Cloud Cover (bearish)
In a Dark-cloud cover you will see a strong white body and the very next day you see the price opening at the top of the previous shadow. However, ultimately it closes near or below the low of the day and that so into the prior white body.
Piercing Pattern (bullish)
In a piercing pattern, you will see a strong black body and the very next day you see the price opening sharply below the previous shadow (white body). However, ultimately it closes above the low of the previous day and that so into the prior black body.