Candlestick Part II: Basic Patterns

By: Ramano Richie
Submitted: 2007-01-17 16:15:09
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A. Doji

Doji describes indecision market. There is no “real body” at this shape. The opening price is exactly the same with the closing price.

Doji is not a turning point in the market but it is the opportunity for the market to turn. It’s a moment of indecision where market is still confused by price direction.

B. Hammer and Hanging Man

Hammer and Hanging Man pattern have identical pattern. What makes them different is only where are they located at the chart. Hammer ends down trends which stop the down trends from going further. Meanwhile, Hanging Man ends up trends which stop the up trends from going further.

Both of them (hammer and hanging man) have two types of shape:

Hammer

Hammer with Empty Candlestick

There is buying pressure at the hammer candlestick which make the closing price is located above the opening price.

According to Munehisa Homma’s theory, this pattern would be followed by bullish pattern.

Hammer with Shaded Candlestick

But what happen when the hammer pattern is a shaded one (not an empty candlestick)? Well, there is still buying pressure at the period but not as strong as we’ve been discussed at the previous example. This time, the closing price is below the opening price.

According to Munehisa Homma’s theory, this pattern would be followed by bullish pattern but the angle is much shallower than the previous one.

Hanging Man

Hanging Man with Shaded Candlestick

There is selling pressure at the hanging man candlestick which make the closing price is located below the opening price.

According to Munehisa Homma’s theory, this pattern would be followed by bearish pattern.

Hanging Man with Empty Candlestick

But what happen when the hanging man pattern is an empty one (not a shaded candlestick)? Well, there is still selling pressure at the period but not as strong as we’ve been discussed at the previous example. This time, the closing price is above the opening price.

According to Munehisa Homma’s theory, this pattern would be followed by bearish pattern but the angle is much shallower than the previous one.

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Richie is a forex trader and forex technical analyst.

You may read my articles at Forex Library and my daily technical analysis at my brother's blog: Brian Signal

Article source: Expert Articles

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