DOJI STAR
A Doji Star is weaker than the Morning or Evening Star: the doji represents indecision. The doji star requires confirmation from the next candlestick closing in the bottom half of the body of the first candlestick.
SHOOTING STAR
The Shooting Star candlestick formation is a significant bearish reversal candlestick pattern that mainly occurs at the top of up trends.
The Shooting formation is created when the open, low, and close are roughly the same price. Also, there is a long upper shadow, generally defined as at least twice the length of the real body.
When the low and the close are the same, a bearish Shooting Star candlestick is formed and it is considered a stronger formation because the bears were able to reject the bears completely plus the bears were able to push prices even more by closing below the opening price.
The Shooting Star formation is considered less bearish, but nevertheless bearish when the open and low are roughly the same. The bears were able to counteract the bears, but were not able to bring the price back to the price at the open.
The long upper shadow of the Shooting Star implies that the market tested to find where resistance and supply was located. When the market found the area of resistance, the highs of the day, bears began to push prices lower, ending the day near the opening price. Thus, the bullish advance upward was rejected by the bears.
The chart below of Cisco Systems (CSCO) illustrates a Shooting Star reversal pattern after an uptrend:
In the chart above of CSCO, the market began the day testing to find where supply would enter the market. CSCO's stock price eventually found resistance at the high of the day. In fact, there was so much resistance and subsequent selling pressure, that prices were able to close the day significantly lower than the open, a very bearish sign.
The Shooting Star is an extremely helpful candlestick pattern to help traders visually see where resistance and supply is located. After an uptrend, the Shooting Star pattern can signal to traders that the uptrend could be over and that long positions should probably be reduced or completely exited.
However, other indicators should be used in conjunction with the Shooting Star candlestick pattern to determine sell signals, for example, waiting a day to see if prices continued falling or other chart indications such as a break of an upward trend line.
For aggressive traders, the Shooting Star pattern illustrated above could be used as the sell signal. The red portion of the candle (the difference between the open and close) was so large with CSCO, that it could be considered the same as a bearish candle occuring on the next day. However, caution would have to be used because the close of the Shooting Star rested right at the uptrend support line for Cisco Systems.
Generally speaking though, a trader should wait for a confirmation candle before entering.
The bullish version of the Shooting Star formation is the Inverted Hammer formation that occurs at bottoms.
With a Shooting Star, the body on the second candlestick must be near the low -- at the bottom end of the trading range -- and the upper shadow must be taller. This is also a weaker reversal signal than the Morning or Evening Star.
The pattern requires confirmation from the next candlestick closing below half-way on the body of the first.
Meaning:
A type of candlestick formation that results when a security's price, at some point during the day, advances well above the opening price but closes lower than the opening price.
Investopedia Says:
BEARISH HARAMI
A trend indicated by a large candlestick followed by a much smaller candlestick whose body is located within the vertical range of the larger candle's body. Such a pattern is an indication that the previous upward trend is coming to an end.
Investopedia Says:
A bearish harami may be formed from a combination of a large white or black candlestick, and a smaller white or black candlestick. The smaller the second candlestick, the more likely the reversal. It is thought to be a strong sign that a trend is ending when a large white candle stick is followed by a small black candlestick.
BULLISH HARAMI
A candlestick chart pattern in which a large candlestick is followed by a smaller candlestick whose body is located within the vertical range of the larger body. In terms of candlestick colors, the bullish harami is a downtrend of negative-colored (black) candlesticks engulfing a small positive (white) candlestick, giving a sign of a reversal of the downward trend.
Investopedia Says:
Because the bullish harami indicates that the falling trend (bearish trend) may be reversing, it signals that it's a good time to enter into a long position. The smaller the second (white) candlestick, the more likely the reversal.
HARAMI CROSS
A trend indicated by a large candlestick followed by a doji that is located within the top and bottom of the candlestick's body. This indicates that the previous trend is about to reverse.
Investopedia Says:
A Harami cross can be either bullish or bearish, depending on the previous trend. The appearance of a Harami Cross, rather than a smaller body, increases the likelihood that the trend will reverse.
HARAMI CANDLESTICK
The Harami (meaning "pregnant" in Japanese) Candlestick Pattern is a reversal pattern. The pattern consists of two Candlesticks:
- Larger Bullish or Bearish Candle (Day 1)
- Smaller Bullish or Bearish Candle (Day 2)
The Harami Pattern is considered either bullish or bearish based on the criteria below:
A bearish Harami occurs when there is a large bullish green candle on Day 1 followed by a smaller bearish or bullish candle on Day 2. The most important aspect of the bearish Harami is that prices gapped down on Day 2 and were unable to move higher back to the close of Day 1. This is a sign that uncertainty is entering the market.
In contrast, a bullish Harami occurs when there is a large bearish red candle on Day 1 followed by a smaller bearish or bullish candle on Day 2. Again, the most important aspect of the bullish Harami is that prices gapped up on Day 2 and price was held up and unable to move lower back to the bearish close of Day 1.
The chart below of the Nasdaq 100 E-mini Futures contract shows an example of both a bullish and bearish Harami candlestick pattern:
The first Harami pattern shown above on the chart of the E-mini Nasdaq 100 Future is a bullish reversal Harami. First there was a long bearish red candle. Second, the market gapped up at the open. In the case above, Day 2 was a bullish candlestick, which made the bullish Harami even more bullish.
Buy Signal
A buy signal could be triggered when the day after the bullish Harami occured, price rose higher, closing above the downward resistance trend line. A bullish Harami pattern and a trend line break is a potent combination resulting in a strong buy signal.
The second Harami pattern shown above on the chart of the E-mini Nasdaq 100 Future is a bearish reversal Harami. The first candle was a long bullish green candle. On the second candle, the market gapped down at the open. The chart above of the e-mini shows that Day 2 was a bearish candlestick; this made the bearish Harami even more bearish.
Sell Signal
A sell signal could be triggered when the day after the bearish Harami occured, price fell even further down, closing below the upward support trend line. When combined, a bearish Harami pattern and a trend line break is a strong indication to sell.
Harami candlestick:
A Harami formation indicates loss of momentum and often warns of reversal after a strong trend. Harami means 'pregnant' which is quite descriptive. The second candlestick must be contained within the body of the first, though the shadows may protrude slightly.
Bullish Engulfing Pattern
The Bullish Engulfing Candlestick Pattern is a bullish reversal pattern, usually occurring at the bottom of a downtrend. The pattern consists of two Candlesticks:
- Smaller Bearish Candle (Day 1)
- Larger Bullish Candle (Day 2)
The bearish candle real body of Day 1 is usually contained within the real body of the bullish candle of
Day 2.
On Day 2, the market gaps down; however, the bears do not get very far before bulls take over and push prices higher, filling in the gap down from the morning's open and pushing prices past the previous days open.
The power of the Bullish Engulfing Pattern comes from the incredible change of sentiment from a bearish gap down in the morning, to a large bullish real body candle that closes at the highs of the day. Bears have overstayed their welcome and bulls have taken control of the market.
The chart below of the S&P 500 Depository Receipts Exchange Traded Fund (SPY) shows an example of a Bullish Engulfing Pattern occurring at the end of a downtrend:
Buy Signal
There are three main times to buy using the Bullish Engulfing Pattern; the buy signals that are presented below are ordered from the most aggressive to most conservative:
- Buy at the close of Day 2 when prices rallied upwards from the gap down in the morning. A strong indication that the rally on Day 2 was significant and truly a reversal of market sentiment, is if there was a substantial increase in volume that accompanied the large move upward in price.
- Buy on the day after the Bullish Engulfing Pattern occurs; by waiting until the next day to buy, a trader is making sure that the bullish reversal and enthusiasm of the prior day is continuing and was not just a one day occurrence like a short covering rally. In the chart above of the SPY's, a trader would likely not enter the market long on the day after the Bullish Engulfing Pattern because the market gapped down significantly and even made new lows. A trader using methodology #2, would likely wait for a more concrete buy signals such as the one presented in method #3 next.
- After a trader sees the Bullish Engulfing Pattern, the trader would wait for another signal, mainly a price break above the downward resistance line before entering a buy order.
Intra-day Bullish Engulfing Pattern
The following 15-minute chart of the S&P 500 exchange traded fund (SPY) of the 2-day period comprises the Bullish Engulfing Pattern example on the prior page:
- Day 1: As is seen in the chart above, Day 1 was a down day, even closing the day at the low (bearish sentiment).
- Day 2: The open was a gap down, very bearish sign; but the bulls appeared to have had enough because the price of the SPY's went up the rest of the day, closing near the day's highs (bullish sentiment) and higher than Day 1's high.
