Top 6 Most bullish Candlestick Pattern
Candlestick charts were created to help traders better understand price action. Price action allows traders to know whether the market will go up, down, or trade sideways. One of the easiest ways to gauge this market momentum is through different candlestick patterns. Inside this article we will dissect the top bullish candlestick patterns that traders can recognize.
Bullish advanced candlestick patterns give traders confidence that the market will increase in price. This article will dissect the top six bullish candlestick patterns that traders can recognize.
By comprehending the roles of patterns and which candlesticks are commonly seen in the market, traders can more often spot the trading opportunities.
What is the Bullish Candlestick Pattern?
A bullish candlestick pattern is a particular placement of two or more candlesticks on the chart that indicates a breakout or a sustained move to the upside.
Different patterns can be spotted across all timeframes, from intraday charts to weekly and monthly charts, with one similarity that the buyer is in control, and the values are expected to increase.
Trading charts utilize different colored candles to identify bearish and bullish candles. In a color chart, the white and green candles generally indicate bullish candles, whereas bearish candles typically have a red and black candle with a solid body.
How to Read Bullish Candlestick Patterns?
Every candlestick on the chart shows the price of a stock's previous day's price data while utilizing the: opening, closing, low price, or high value.
The color of the central rectangle of the candle tells traders the open and close, while the candle wick signifies the high and low. A bearish (red) candle means the closing price was lower than the opening price. Hence, it shows selling pressure, and the movement is bearish.
On the contrary, white or green candles mean the closing price is higher than the opening price. It displays strong buying pressure, and the movement is bullish.
Why trade Bullish Candlestick Pattern?
Bullish candlesticks are used as a self-sustained signal to enter a long position or confirm other technical signals.
For instance, if you witness a bullish candlestick pattern generating after some time of consolidation, it might indicate that the market is about to increase.
Investors and traders can also opt for bullish candlestick patterns to determine reversal patterns of downtrends. If the bullish candlestick patterns form at the significant support level, it might indicate that the market is about to turn around and head upwards.
6 Bullish Candlestick Patterns
If you dig out the list, many candlestick patterns will pop up with different characteristics, but these six patterns are specifically popular among traders.
All patterns express intense buying pressure and can be an entry indication for a bullish position.
The hammer pattern is bullish and appears at the bottom of the downtrend. This kind of pattern occurs when the low and open prices are almost similar.
The Hammer pattern contains a lower wick which has double length as compared to the original body, which indicates the seller which shows the seller is driving the price lower during the trading session.
While identifying the hammer pattern, keep in mind that the previous trend is a downtrend and assure the uprising trend by analyzing it thoroughly for the coming days.
The reversal pattern should be confirmed with the uprising trend in the trading volume.
Sometimes the inverted hammer also appears in the downtrend and represents a likely trend opposite.
The inverted hammer is almost similar in shape but has a long upper wick of the hammer which shows the buying pressure after the initial price. It is followed by a large selling pressure that was insufficient to compress the price to the initial value.
Consider the example of PLUG. Instantly after opening, the PLUG again got through the low from pre-market. When it approaches those levels, the trade volume shows fluctuation as it reverses in 5 minutes.
You can see that a shelf forms close to the bottom of this kind of body. The bar on the left and right sides also contributes by opening and closing in the shelf area.
The Bullish Engulfing Pattern and its counterpart, which are known as the Bearish Engulfing Pattern, are perfect and effective to recognize. The bullish engulfing pattern appears more often on the chart and has a good record of a positive role in the bullish direction.
Similar to the majority of candlestick patterns, this one also comprises two candle lines. Candle number one is generally a small bearish black candle, and the other is a larger bullish white candle.
The number two candle in a bullish engulfing pattern forms with a bit of space but then trades up and ends with an ending above the previous candle's initial price.
This pattern is supposed to be visible at the very least or support right after bearish fluctuation. However, if it becomes visible at resistance, it is known as bullish engulfing, and its possibility of staying bullish may or may not result in fruition.
Consider the similar example of PLUG on the same day. This time after the later time of the day, PLUG has faced a significant decline.
After a sudden decline in the bullish engulfing pattern, the price reaches the support level from the previous pattern. In this event, you will see two bullish reversal candles that entirely consume the previous bearish candlestick.
The tweezer bottom is another well-known and often spotted bullish candlestick pattern. This chart has two candles with minimal-sized bodies. The first candle is supposed to be red while the other one needs to appear in green color or bullish candle.
The candles are generally quite close regarding their opening and closing price. This produces a "visual of the pair of tweezers."
In terms of meaning, the Tweezer Bottom indicates to the chart analyzer the fact that the value is striving to get down but to no avail. The presence of double candles shows the availability or demand in the market.
The signature volume tends to visibly increase as supply is absorbed, which keeps the candle minimal in the influence of selling pressure. The entry is supposed to be taken easily as price breaks are higher than the other candle. However, this can end at lows.
Here is the Tweezer Bottom candlestick example of BNGO. It beautifully displays the movement of 5 minutes value fluctuation. Pay close attention to the two candles, their symmetry, and the closing and opening of red and green bars.
The volume is of specific interest on the first red doji. See the elevation here. When considering the context, it can be taken as an exhausting supply. Moreover, the other green candle opens or suddenly disappears in volume.
Hence, it validates that selling pressure has been exhausted or absorbed. It means that in the absence of selling pressure, the stock price generally follows an upward trend.
The Piercing Pattern
The piercing line pattern is a common candlestick pattern that offers potential bullish reversal patterns signs and forms close to the support levels at the end of the downtrend. This sort of pattern consists of two candlesticks. The first candlestick is bearish, and the second candlestick is bullish.
The bearish candlestick has a larger body as compared to the bullish. The second and bullish candlestick forms below the lower end of the previous candlestick and is supposed to close above the middle of the actual body of the first candlestick.
While trading, the investors need to look at some characteristics of the piercing candlestick pattern. These are
The trend should be declining as the piercing line pattern is a bullish reversal pattern.
The gap between both candlesticks shows how powerful the trend reversal would be.
The length of the candlestick has a prominent role in evaluating the force with which the bullish reversal will take place.
The bullish candlestick should be closer to the middle point than the bearish candlestick.
Both candlesticks should have larger bodies.
This pattern has a significant risk of facilitating low support. They may act like hoppers in the range of trading. This is an example of a piercing line pattern. The 5 minutes candlestick charts of BB indicate the combination of initial range breakout with these line patterns. Altogether it can add confidence to the entry.
The Morning Star
It is an actual bullish candlestick pattern. The Morning Star is a triple bullish candlestick pattern showing bullish reversal. It generally forms the downtrend. It gives a prior warning that the downtrend will change the pattern. It is going to reverse to an uptrend.
This pattern consists of three candles. The first one is a long and bearish candle, the second candle can either be bullish or bearish but has a short body, and the third candle is bullish. While trading with the morning star pattern, the trader should remember that the previous trend should be a downtrend.
The plot of the pattern is typical, but the existence of a third indicates that there is either hesitancy or a dearth of follow-through towards the downside.
Moreover, as a result, without further selling pressure, the candlesticks resemble higher price seller cover, and the buyer leverages the lower stock pricing.
The morning star pattern is seen as the Morning Doji Stars as well. They visually look alike except for the presence of the central body. However, the role of buyer and seller stays similar.
In this PTON instance, you can see the pattern in action. A close-bodied indecision candle follows a long bearish candle. The bullish candle takes hold further.
Three White Soldiers
This is a pure bullish candlestick pattern that generates at the end of a downtrend and prominently shows a bullish reversal. This pattern contains three long bullish candlesticks, which are apparently green and does not contain an extensive wick.
This well-known bullish candlestick pattern indicated the uptrend reversal due to the significant buying pressure by the purchasers. In the pattern, all three candles open in the real body of the prior pattern.
Here is a beautiful example of Three White soldiers on the daily chart of US dollars. It tells us about the formation of three white soldiers after the downtrend.
Risks of Bullish Candlestick Pattern
The candlestick mentioned above patterns are helpful tools that help traders identify potential opportunities, but you need to keep in mind the risks associated with them while practicing the trade.
For instance, you might correctly figure out a pattern but proves wrong in materializing into the bullish outcome due to the market event that crashes down stocks altogether. This is also called systematic risk.
It is crucial to keep in mind that these patterns do not guarantee successful trade. Therefore, many traders use a part of the candle's range which is open, high, low, or close, for their last stop and loss management of risk level.
Tips to Improve Chances of Success When Trading with Bullish Candlestick Pattern
No one or any tool can take guarantee that the trade will result in 100% success. The financial market is always unpredictable, but here we have mentioned some general tips to increase the chances of success.
First of all, always look for confirmation before stepping into any trade and ensure that the pattern is occurring according to the existing trend. Secondly, you can also utilize the bullish formation with the technical indicators, for instance, RSI, MACD, simple moving average, etc.
Apart from that, you can pay close attention to the shape and size of the candlestick on the charts. With a larger and more pronounced pattern, there are more chances of success.
With time, you will get to know more about candlestick patterns and their trick of higher success chances.
The bullish candlestick pattern is a beneficial means of recognizing the opportunities for high-value trade. However, investors and traders confuse when it comes to identifying the patterns in real-time. You can only achieve the skills with technical analysis practice.
These candle patterns help predict future price movement but do not guarantee success. While these patterns have a high win rate, there is still a chance of failure. The best way to trade these patterns is by incorporating them with other pieces of evidence in a trade scenario.