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Basics of Candlestick

& Patterns

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Candlestick Basics Japanese Rice Traders created them over

400 years ago Steve Nison is credited with introducing

them into the U S markets Gregory Morris and Stephen Bigalow are

the other 2 major candlestick gurus There are over 100 Candlestick patterns Candlesticks show investor sentiment

more visual than OHLC bars

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Bearish Candle Sometimes referred to as a Black Candle

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Bullish Candle Sometimes referred to as a White Candle

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n ec s ve an es(cont)

Spinning-Top No one won the battle of the Bulls and Bears Body is less than 1/3rd of the candle range H L The tails are longer than the body

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Bullish Candlestick

Patterns

Engulfing

Morning Star

Hammer

Three White Soldiers

Kicking

http://www.litwick.com/indicators/1110.htmlhttp://www.litwick.com/indicators/1130.htmlhttp://www.litwick.com/indicators/2144.htmlhttp://www.litwick.com/indicators/1123.htmlhttp://www.litwick.com/indicators/1123.htmlhttp://www.litwick.com/indicators/1123.htmlhttp://www.litwick.com/indicators/2144.htmlhttp://www.litwick.com/indicators/2144.htmlhttp://www.litwick.com/indicators/1130.htmlhttp://www.litwick.com/indicators/1130.htmlhttp://www.litwick.com/indicators/1110.htmlhttp://www.litwick.com/indicators/1110.html

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u s ngu ngDefinition

Bullish Reversal 63% of the time

How to Identify it Candle 1 is a bearish candle Candle 2 completely engulfs

the body of the candle 1Stock in a downtrend orconsolidating Pattern suggests downtrendhas lost momentum and thebulls may be gaining strength Engulfing pattern is also thefirst two candles of the ThreeOutside patterns. Confirmation is suggested

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Morning StarBullish Reversal 78% of the time

How to Identify it First candle is a long blackcandleSecond candle gaps downand trades within a small

range and closes at or nearits open.The third candle is a whitecandleStock has in a downtrend orconsolidating Pattern suggests thetrading sentiment haschanged and trend reversal isa high probability No confirmation is requiredor suggested

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Morning Star - good

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Bullish Kicker - good

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Bullish Kicker - bad

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Bearish Candlestick

Patterns

Engulfing

Evening Star

Hanging Man

Three Black Crows

Kicking

http://www.litwick.com/indicators/1210.htmlhttp://www.litwick.com/indicators/1212.htmlhttp://www.litwick.com/indicators/2238.htmlhttp://www.litwick.com/indicators/1223.htmlhttp://www.litwick.com/indicators/1223.htmlhttp://www.litwick.com/indicators/1223.htmlhttp://www.litwick.com/indicators/2238.htmlhttp://www.litwick.com/indicators/2238.htmlhttp://www.litwick.com/indicators/1212.htmlhttp://www.litwick.com/indicators/1212.htmlhttp://www.litwick.com/indicators/1211.htmlhttp://www.litwick.com/indicators/1210.htmlhttp://www.litwick.com/indicators/1210.htmlhttp://www.litwick.com/indicators/1210.html

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Bearish EngulfingBearish Reversal 79% of the time

How to Identify it First candle is a whitecandle

Second candle is Bearishand its body completelyEngulfs the first candlescandle body Stock has been in anuptrend Pattern suggests the bearshave taken control and thetrend is about to reverse. Confirmation is suggested

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Bearish Engulfing - Bad

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ear s ngu ng -Good

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Evening StarBearish Reversal 72% of the time

How to Identify it First candle is a long whitecandleSecond candle trades within

a small range and closes at ornear its open.The third candle is a blackcandleStock is in an uptrend Pattern suggests the

trading sentiment haschanged and trend reversal ishigh probability No confirmation is requiredor suggested

Note:

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Evening Star

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Evening Star

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Hanging ManBearish Reversal 59% of the time

How to Identify it Single candle pattern Candle can be bullish or

bearish Signal considered strongerif candle bearish Candle body is less than 1/3of the range H LStock is in an uptrend Long tail implies sharp sell-off after open and suggestmore selling to come Requires confirmation

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Bearish KickerBearish Reversal 54% of the time

How to Identify itThe first candles open andthe second candles open are

the same. The price movement is inopposite directions from theopening price. The trend has no relevancein a Kicker situation. The signal is usually formedby surprise news before orafter market hours. The price never retracesinto the previous candle'strading range. No confirmation is required

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Bearish Kicker - Bad

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Bearish Kicker -Good