Investing in Philippines: Technical side: Candlestick Bearish Patterns

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Wednesday, May 9, 2012

Technical side: Candlestick Bearish Patterns

Been reading Steve Nison's book "JAPANESE CANDLESTICK CHARTING TECHNIQUES" and I would to share with you some of the most popular bearish candlestick patterns. These patterns usually act as a reversal indicator which could be use to your advantage in your buy or even sell strategy.


Hanging Man

It is a single candle with a small body(either white/green or black/red) and a long lower tail just like the image below.

source: http://www.candlestickanalysis.com

It is usually found at the top of a uptrend and it signals the reversal of the uptrend. In effect it has a opposite effect of a hammer. Hanging man usually signals the point where the uptrend starts to go down. The continuous uptrend prompts buyers to buy while price is low while sellers keeps on demanding higher price. 

When the hanging man candle appears it means that those who bought are now left out hanging because the trend now is reverse. The stock is now overbought and everyone wants to get rid of their holdings thus they are force to sell lower.






Bearish Engulfing 


A chart pattern made of two candles of which a white/green candle with a small body is followed by a taller black/red candle making it look like the black/red candle will engulf the small candle.

source: www.investopedia.org


Such pattern indicates the change in trend after uptrend. 


Dark Cloud Cover

A Dark Cloud Cover is a pattern where a tall white/green candle is followed by a  black/red candle which has a higher open and a closing price not below the previous closing price.


source: http://www.econtrader.com




Bearish Piercing Pattern


A Bearish Piercing Pattern is made when a black/red tall candle is followed by a small white/green candle that is below midway the black candle's body. If the white/green candle's body is above midway of the black/red's body the pattern indicates a Bullish Piercing Pattern.




Such pattern is a continuation of a downtrend. When the white/green candlestick's body is above midway of the black/red candle, it could indicate of a reversal of the downtrend.

4 comments:

Anonymous said...

Sir, I am a newbie, your blog is very informative. Thank you. I know nothing about technical analysis and would like to learn how to do this. San ako pwedeng mag-aral? Thank you

Investing in Philippines said...

Thank you fro asking. If you are a client of any of the online stockbrokers you can sit in one of their free for clients technical analysis sessions. COL has one check their website. If you want to have self study you can look for Steve Nison's book in the net(its up to you if you want to purchased it or you know what I meant already :) ). Also If you watch Pesos and Sense from time to time they have technical analysis topics in between. From time to time some groups have some kind of an informal session which include technical analysis of some stocks. You can check their forums and search for one if that group has... but you can always check my site for any update on some technical analysis...

I hope I am able to help.Thank you very much for your patronage.

Anonymous said...

I am just wondering where you can find candlestick charts of stocks in the PSE in the internet. thanks :D

Investing in Philippines said...

Hi there!

You can go to the stock you are analyzing and then on the graph you can change the type of the graph to candlestick. Click on the Chart tab and in the new page the chart is presented. You can change the time frame to clearly see the chart.

Chitika