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Reversal Patterns (page 3)
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Piercing Line Pattern
This pattern occurs when gaps open in the market during a downward trend, but the market gains enough strength to close above the midpoint of the previous day. This pattern is a good indication that the opportunity for the bullish investors to enter the market and help support the trend reversal. It's also the opposite of the Dark Cloud Cover pattern. It's a bullish trend that only has moderate reliability.
- A long black body followed by a white body.
- The white body peaks above the midpoint of the prior white body.
- This pattern occurs in a downward trend.
Three Black Crows Pattern
This pattern is indicated by three long black days that each end with consecutively lower closing rates. It generally indicates that the market rates have been too high for too long of a period and the investors are slacking off to compensate. This pattern is a bearish trend and has a high reliability rate.
- Three black days occur, each with a close below the previous day.
- Each day opens within the body of the previous day.
- Each day closes near or at the low of the day.
Three White Soldiers Pattern
With this pattern, there will be three long white days in a downward trend; each day will close at consecutively higher rates. This usually reflects fortitude in the future market, since a trend reversal is in progress that is building on moderate increases in the market. This bullish trend offers a high reliability rate.
- Three long white days occur, each with a higher close than the previous day.
- Each day opens within the body of the previous day.
- Each day closes near or at the high of the day.
There are also several types of single candle patterns in candlesticks' theory, as defined below:
- Dragonfly Doji
- Gravestone Doji
- Hammers/ Hanging Man
- Hollow Red Candles
- Filled Black Candles
