Bullish High Reliability Reversal Candle Patterns.

  Bullish  High Reliability Reversal  Candle Patterns

1.   BULLISH PIERCING LINE

 

Type:                  Reversal

Relevance:       Bullish

Prior Trend:      Bearish

Reliability:         High

Definition: 

Bullish Piercing Line Pattern is a bottom reversal pattern. A long black candlestick is followed by a gap lower during the next day while the market is in downtrend. The day ends up as a strong white candlestick, which closes more than halfway into the prior black candlestick’s real body.

Recognition Criteria:

1. Market is characterized by downtrends.

2. We see a long black candlestick.

3. Then we see a long white candlestick whose opening price is below previous day’s low on the second day.

4. The second day’s close is contained within the first day body and it is also above the midpoint of the first day’s body.

5. The second day however fails to close above the body of the first day.

Explanation:

The market moves down in a downtrend. The first black real body reinforces this view. The next day the market opens lower via a gap. Everything now goes, as bears want it. However suddenly the market surges toward the close, leading the prices to close sharply above the previous day close. Now the bears are losing their confidence and reevaluating their short positions. The potential buyers start thinking that new lows may not hold and perhaps it is time to take long positions.

Important Factors:

In the Bullish Piercing Pattern, the greater the degree of penetration into the black real body, the more likely it will be a bottom reversal. An ideal piercing pattern will have a real white body that pushes more than half way into the prior session’s black real body.

A confirmation of the trend reversal by a white candlestick, a large gap up or by a higher close on the next trading day is suggested.

 

 

  

2. BULLISH KICKING PATTERN

Type:    Reversal

Relevance:       Bullish

Prior Trend:     N/A

Reliability:        High

Confirmation:   Needed

Definition: 

The Bullish Kicking Pattern is a White Marubozu following a Black Marubozu. After the Black Marubozu, market gaps sharply higher on the opening and it opens with a gap above the prior session’s opening thus forming a White Marubozu.

Recognition Criteria:

1. Market direction is not important.
2. We first see a Black Marubozu pattern.
3. Then we see a White Marubozu that gaps upward on the second day.

Explanation:

This Bullish Kicking Pattern is a strong sign showing that the market is headed upward. The previous market direction is not important for this pattern unlike most other candle patterns. The market is headed up with the Bullish Kicking Pattern as the prices gap up the next day. The prices never enter into the previous day's range. Instead they close with another gap.

Important Factors:

We should be careful that both of the patterns do not have any shadows or they have only very small shadows (they both are Marubozu).

The Bullish Kicking Pattern is somewhat similar to the Bullish Separating Lines Pattern. The opening prices are equal in Bullish Separating Lines Pattern while in the Bullish Kicking Pattern a gap occurs.

The Bullish Kicking Pattern is highly reliable, but still, a confirmation of the reversal on the third day should be sought. This confirmation may be in the form of a white candlestick, a large gap up or a higher close on the third day.

3. BULLISH ABONDONED BABY

Type:               Reversal

Relevance:    Bullish

Prior Trend:   Bearish

Reliability:      High

Confirmation:  Suggested

Definition:

The Bullish Abandoned Baby Pattern is a very rare bottom reversal signal. It is composed of a Doji Star, which gaps away (including shadows) from the prior and following days’ candlesticks.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We usually see a long black candlestick in the first day.
3. Then a Doji appears on the second day whose shadows gap below the previous day's lower shadow and gaps in the direction of the previous downtrend.
4. Then we see a white candlestick on the third day with a gap in the opposite direction with no overlapping shadows.

Explanation:

We have a similar scenario that is valid for most of the three-day star patterns. In a falling market, the market shows bearish strength first with a long black candlestick and opens with a gap on the second day. The second day trading is within a small range and second day closes at or very near its open. This now suggests the potential for a rally showing that positions are changed. The signal of trend reversal is given by the white third day and by well-defined upward gap.

Important Factors:

The Bullish Abandoned Baby Pattern is quite rare.

The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested.

GENZ fell and churned along the 20 level to establish support. It then formed a bullish Abandon Baby pattern which began its reversal of the downtrend. If this pattern formed as the first set of candles at 20, it is less likely a reversal could have immediately occurred, but since the Abandon Baby formed after the stock was able to establish support, the play to the long side became more reliable.

4. BULLISH MORNING DOJI STAR

Type:                Reversal
Relevance:     Bullish
Prior Trend:    Bearish
Reliability:       High

Definition:

This is also a three-candlestick formation signaling a major bottom reversal. It is composed of a long black candlestick followed by a doji, which characteristically gaps down to form a doji star. Then we have a third white candlestick whose closing is well into the first session’s black real body. This is a meaningful bottom pattern.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We see a long black candlestick in the first day.
3. Then we see a Doji on the second day that gaps in the direction of the previous downtrend.
4. The white candlestick on the third day confirms the reversal.

Explanation:

Black real body while market is falling down may suggest that the bears are in command. Then a Doji appears showing the diminishing capacity of sellers to drive the market lower. Confirmation of bull ascendancy is the third day’s strong white real body. An ideal Bullish Morning Doji Star Pattern must have a gap before and after the middle line’s real body. The second gap is rare, but lack of it does not take away from the power of this formation.

Important Factors:

The Doji may be more than one, two or even three.

Doji’s gaps are not important.

The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested. 

 

5. BULLISH MORNING STAR

Type:                Reversal

Relevance:       Bullish

Prior Trend:     Bearish

Reliability:       High

Definition:

This is a three-candlestick formation that signals a major bottom. It is composed of a first long black body, a second small real body, white or black, gapping lower to form a star. These two candlesticks define a basic star pattern. The third is a white candlestick that closes well into the first session’s black real body. Third candlestick shows that the market turned bullish now.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We see a long black candlestick in the first day.
3. Then we see a small body on the second day gapping in the direction of the previous downtrend.
4. Finally we see a white candlestick on the third day.

Explanation:

We see the black body in a falling market suggesting that the bears are in command. Then a small real body appears implying the incapacity of sellers to drive the market lower. The strong white body of third day proves that bulls have taken over. An ideal Bullish Morning Star Pattern preferably has a gap before and after the middle candlestick. The second gap is rare, but lack of it does not take away from the power of this formation.

Important Factors:

The stars may be more than one, two or even three.

The color of the star and its gaps are not important.

The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested.

 

 

6.BULLISH THREE INSIDE UP

Type:                Reversal

Relevance:       Bullish

Prior Trend:     Bearish

Reliability:       High

Definition:

The Bullish Three Inside Up Pattern is another name for the Confirmed Bullish Harami Pattern. The third day is confirmation of the bullish trend reversal.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We see a Bullish Harami Pattern in the first two days.
3. Then we see a white candlestick on the third day with a higher close than the second day.

Explanation:

The first two days of this pattern is simply the Bullish Harami Pattern, and the third day confirms the reversal suggested by the Bullish Harami Pattern, since it is a white candlestick closing with a new high for the last three days.

Important Factors:

The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested. 

7. BULLISH THREE OUTSIDE UP

Type:                Reversal

Relevance:       Bullish

Prior Trend:     Bearish

Reliability:       High

Definition:

The Bullish Three outside up Pattern is simply another name for the Confirmed Bullish Engulfing Pattern. The third day is confirmation of the bullish trend reversal.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We see a Bullish Engulfing Pattern in the first two days.
3. The third day is a white candlestick with a higher close than the second day.

Explanation:

The first two days of this three-day pattern is simply a Bullish Engulfing Pattern, and the third day confirms the reversal suggested by the Bullish Engulfing Pattern since it is a white candlestick closing with a new high for the last three days.

Important Factors:

The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested. 

Since bullish Engulfing patterns have decent reliability when played at support, Three Outside Up formations have high reliability when they form in the same situation. Here, FMXI rallied and then gave back about 50% of its gains. The stock then formed a bullish Engulfing pattern and followed it up with a another up day to complete the Three Outside Up pattern, and the stock proceeded to bounce over 30% in just one week.



Here is another example of the high reliability bullish Three Outside Up pattern forming at a level that was previously established as support. Note the volume surges.


TEVA was bouncing around in pretty volatile fashion when it formed a bullish Three Outside Up pattern which ended the consolidation period and began the next leg up for the stock

8. BULLISH THREE WHITE SOLDIERS

Type:                Reversal

Relevance:       Bullish

Prior Trend:     Bearish

Reliability:       High

Definition:

Bullish Three White Soldiers Pattern is indicative of a strong reversal in the market. It is characterized by three long candlesticks stepping upward like a staircase. The opening of each day is slightly lower than previous close rallying then to a short term high.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We see three consecutive long white candlesticks.
3. Each candlestick closes at a new high.
4. The opening of each candlestick is within the body of the previous day.
5. Each consecutive day closes near or at its highs.

Explanation:

The Bullish Three White Soldiers Pattern appears in a context where the market stayed at a low price for too long. The market is still falling down and it is now approaching a bottom or already at bottom. Then we see a decisive attempt upward shown by the long white candlestick. Rally continues in the next two days characterized by higher closes. Bears are now forced to cover short positions.

Important Factors:

The opening prices of the second and third days can be anywhere within the previous day's body. However, it is better to see the opening prices above the middle of the previous day's body.

If the white candlesticks are very extended, one should be cautious about an overbought market.

The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested.

  

Here is an example of a bullish Three White Soldiers formation that formed well into CP's uptrend. I personally think it's a little late to chase the stock, so this merely serves as an example of what this pattern looks like. 

9. BULLISH CONCEALING BABY SWALLOW

Type:                Reversal

Relevance:       Bullish

Prior Trend:     Bearish

Reliability:       High

Definition:

This pattern is highlighted by two consecutive Black Marubozu. They are characterized by the fact that a gapping black candlestick trades into the body of the previous day and it is seen during a downtrend. Then there is another Black Marubozu on the third day showing sale of positions since it closes at a new low. However this may give incentive to the shorts to cover their positions implying that a bullish reversal is now possible.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We see two consecutive Black Marubozu in the first and second days.
3. Then we see a black candlestick on the third day opening with a downward gap but trading into the body of the second day and it is characterized by a long upper shadow.
4. Finally we see another Black Marubozu on the fourth day that completely engulfs the candlestick of the third day including the shadow.

Explanation:

Two black Marubozu show that downtrend is continuing to the satisfaction of the bears. On the third day, we see a downward gap further confirming the downtrend. However, prices on the third day start going above the close of the previous day causing some doubts about the bearish direction even though the day closes at or near its low. The next day shows us a significantly higher gap in the opening. After the opening, however, prices again go down closing at a new low. This last day may be interpreted as a good chance for the short-sellers to cover their short positions.

Important Factors:

The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested.