Bullish Candlestick Patterns

There are many candlestick patterns but only a few are actually worth knowing.Remember that these patterns are only useful when you understand what is happening in each pattern.They must be combined with other forms of technical analysis to really be useful. 

Bullish candlestick patterns

Engulfing

This is my all time favorite candlestick pattern. This pattern consists of two candles. The first day is a narrow range candle that closes down for the day. The sellers are still in control of the stock but because it is a narrow range candle and volatility is low, the sellers are not very aggressive. The second day is a wide range candle that "engulfs" the body of the first candle and closes near the top of the range. The buyers have overwhelmed the sellers (demand is greater than supply).

Hammer

  By the end of the day, the buyers won and had enough strength to close the stock at the top of the range. Hammers can develop after a cluster of stop loss orders are hit. That's when professional traders come in to grab shares at a lower price.

Harami

When you see this pattern the first thing that comes to mind is that the momentum preceding it has stopped. On the first day you see a wide range candle that closes near the bottom of the range. The sellers are still in control of this stock. Then on the second day, there is only a narrow range candle that closes up for the day. Note: Do not confuse this pattern with the engulfing pattern.

Piercing

This is also a two-candle reversal pattern where on the first day you see a wide range candle that closes near the bottom of the range. The sellers are in control. On the second day you see a wide range candle that has to close at least halfway into the prior candle. Those that shorted the stock on first day are now sitting at a loss on the rally that happens on the second day. This can set up a powerful reversal.

Doji

The doji is probably the most popular candlestick pattern. The stock opens up and goes nowhere throughout the day and closes right at or near the opening price. Quite simply, it represents indecision and causes traders to question the current trend. This can often trigger reversals in the opposite direction