Bullish Candlestick Pattern
What is Bullish Engulfing Pattern?
Bullish Engulfing Candlestick Pattern generally forms at the bottom of a downtrend, during a decline or near a potential support. Basically, it is made up of two candlesticks or can say it takes 2 days for the pattern to form.
1. Day 1 (Smaller Bearish Candlestick): On Day 1, a bearish candlestick (Open price is higher than the close price) is formed shown as red candlestick in the Figure.
2. Day 2 (Larger Bullish Candlestick): On Day 2, a bullish candlestick (open price lower than the close price) is formed which completely covers or engulfs the body of bearish candlestick formed on Day 1, shown as green candlestick in the below Figure.
The name of this pattern is derived from the same fact that, Day 2 candlestick completely engulfs the Day 1 Candlestick.
For this pattern to be formed it is extremely important:
a. The open price of the Day 2 candlestick is lower than the close price of Day 1 candlestick.
b. The close price of the Day 2 candlestick is higher than the open price of Day 1 candlestick.
Bullish Engulfing Candlestick Pattern is a very common trend reversal pattern. Though it is not easy to pick this pattern but if done correctly one can easily catch the trend reversal/buying Signal, and it’s highly rewarding.
The strength of this pattern is increased by the size of the engulfing candlestick. The bigger the engulfing candlestick the more significant is the pattern. The first day the small bearish candle may look like a continuation of downtrend but its small size irrespective of wicks may show that the bearish signal is weakening. This is confirmed by the long bullish
Candlestick formed the next day. The larger candlestick tells a lot more about the market sentiments that the bull is taking over the bear.
What is Bullish Harami Candlestick Pattern?
Bullish Harami Candlestick Pattern is formed at the bottom of a downtrend or near a significant support. This pattern is made up of two Candlesticks or can say it takes 2 days for this pattern to form.
Second Day: A small bullish candlestick is formed shown in green in the fig below.
The pattern got its name because in Japanese: Harami means pregnant or body within. In this pattern, a small bullish candlestick is formed on day 2 which lies within the body of the bearish candle formed on day 1. Or people say the big bearish candlestick of Day 1 gives an impression of a lady and the small bullish candlestick formed on Day 2 is the protruding baby bump of that lady.
For this pattern to form, it is very important that
a. The open price of the Day 2 candlestick is higher than the close price of Day 1candlestick.
b.The close price of the Day 2 candlestick is lower than the open price of Day 1 candlestick.
Bullish Harami pattern is considered to be a trend reversal pattern, giving investors the buy signal indicating that the bear run is over and the bull is taking over the market.
The size and location of the bullish candlestick formed on Day 2 will tell more about the magnitude of this pattern. The bigger bearish candle of Day1 and a comparably small bullish candle of Day 2 represent strong trend reversal. Similarly, if the Bullish candle formed on Day 2 is located near the bottom of the bearish candlestick formed on Day 1 then one can say the uptrend may be slow, but if it lies in the mid or near the top side of the bearish candle one can say the reversal is moderate to strong.
What is Piercing Line Chart Pattern?
The Piercing Line Chart Pattern is a bullish candlestick reversal pattern, of moderate reliability and is formed at the downtrend, or at a possible support. This pattern is consist of 2 candlesticks or one can say it takes two days for this pattern to form.
Day 1: Day one candlestick is the continuation of the downtrend therefore bearish in nature and it has no significance by its own formed in a downtrend.
Day 2: On Day two a bullish candlestick is formed, which almost covers half the body of the bearish candle formed on Day 1.
For this pattern to be valid it is extremely important:
1. The open price of the Day 2 candlestick is lower than the close of Day 1 candlestick.
2. The close price of the day 2 candlestick must close above the 50% of the body of the day 1 candlestick.
Piercing Line Chart Pattern is an indication that the bear is losing its control and bulls are taking over it. However one has to wait for the third day, for this pattern to confirm.
The Strength of this pattern is maximized if the day two candlestick covers more than the 50% of the bearish candlestick formed on Day 1. The more it covers more strong is the bullish signal. The formation of a bullish candle or a gap up on the third day confirms this pattern reliability.