Candle Trend Technical Analysis
Candlesticks are bar-like representations of price that are useful in technical analysis. Many of the sources contain images that provide a clearer idea of what candlesticks look like and how they function. Certain candlestick patterns can confirm rising or falling values, as well as trend reversals. Other indicators should not be neglected because candlestick patterns may be misleading by themselves.
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Terminology Overview
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"Bullish" refers to surging stock prices and optimism. "Bearish" corresponds to falling prices and pessimism. For purposes of this article, blue candlesticks will refer to those with a higher closing price than opening price. Red candlesticks indicate a closing price below opening price.
Bullish Trend
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The "Bullish Rising Three" candlestick indicator shows price increase. The pattern is identified by two tall blue candlesticks with short tails that border three small red candles.
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Bearish Trend
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To confirm a bearish trend, look for a mirror of the "Bullish Rising Three." The small "stars" would be rising, but staying within the price range of the two longer, outer red candlesticks.
Entry and Exit Points
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Hanging doji candlesticks extending unusually high indicate the end of a bullish trend (selling point), or a bearish trend (buying point) if they are below surrounding candlesticks.
Other Indicators
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Several candlestick indicators have moderate/weak reliability records, compromising their value to the trader. Using other indicators such as moving averages and stochastic oscillators can help to identify profit opportunities without exposure to excessive risk or uncertainty.
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References
- Urban Solutions Center/Texas A&M University: Types Of Charts
- ChartSchool, StockCharts.com: Candlestick Bearish Reversal Patterns
- Investopedia Articles: Advanced Candlestick Patterns
- ChartSmarts (Smarter Than The Average Bear): Pattern Recognition
- Candlestick Trading Forum: The Dynamic Doji---A Clear Trend Reversal Signal
- Photo Credit In a copper candlestick image by Imageman Rez from Fotolia.com
