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In the previous article, we covered the basics of how to read a candlestick, and what the candlesticks meant. If you have not read the article, please do so here. Today, we will be looking more closely at some bullish candlestick formations, with hopes of seeing some of them come up soon!

 

*Disclaimer: The contents of this article are meant to provide helpful insights into the cryptocurrency market. The writer is not responsible for any consequences to any person reading and using this post for trades and investments. Readers should be aware that the cryptocurrency market is volatile, and all trading involves risks that cannot be avoided.

 

Bullish Abandoned Baby

 

Image Taken From: Humble Traders

Just as the name implies, it is a three-candle pattern that has a doji being ‘abandoned’ in the middle.

A rare, but reliable, candlestick pattern that occurs at the end of a bear run, it signifies a change towards an upside trend.

Criteria:

The first candlestick is a bearish candle. The doji candle gaps below, and is then followed by a bullish candle that gaps above.
The body and shadow of the middle candlestick (the doji) does not overlap any part of the previous or next candlestick, which gives it the visual look of being ‘abandoned’ by the parent on either side.

 

Bullish Harami Cross

 

Image Taken From: Humble Traders

A Bullish Harami Cross is a candlestick pattern that is best used in a daily chart, and is a reversal candlestick pattern that typically occurs at the end of a bear run. It signifies a change towards an upside trend.

Reasoning:

The first candlestick is long and bearish, a sign that the bears are in control of the market. However, the next candlestick is a doji which opens above the previous day’s closing price. This is an indication of indecision, and the bears are now ‘closing’ their short positions, which often leads to a bullish run.

Criteria:

The first candlestick is a long, bearish candle. The following doji candle gaps above the previous day’s close. This pattern is ideally, but not necessarily, followed by a candlestick with heavy, bullish volume.

 

Morning Star

 

Image Taken From: Humble Traders

A Morning Star pattern is a bullish, 3-candlestick pattern that appears at the bottom of a bear run. Best viewed in daily charts, it is a strong reversal signal that indicates a change toward an upside trend.

Reasoning:

The first candle is a bearish candle, with clear indications that the bears are running the market. It is not uncommon for this candle to indicate new lows.

The second candle starts with a bearish gap, another sign that bears are still running the market. However, the closing price is not much lower, and the candle has a small, body (bullish or bearish, or even a doji).

The third candle is the most significant; it begins with a bullish gap, and closes at an even higher price. This indicates that bulls have taken charge of the market, and the closing price of the third candle is often seen to overshadow the losses of day one.

Criteria:

The first candle is bearish, followed by a small bodied candle (or a doji) that gaps down. The final candle gaps up, and closes at or above the midpoint of the first candle.

 

Bullish Piercing Line

 

Image Taken From: Humble Traders

The Bullish Piercing Line candlestick is a 2-candlestick pattern that indicates bullish reversal, and is usually seen at the end of a small or moderate downward trend.

Reasoning:

The first candle is a bearish candle, which is followed by a bullish candle that closes above the middle of the first red candle; hence its name ‘piercing line’.

In this situation, the first candlestick was dominated by bears, who pushed prices down on the first day. However, the second candlestick shows the bulls rallying, rejecting the downward trend and even closing above the middle line of the losses. This is a strong bullish sentiment because it demonstrates that excess supply has been absorbed, and demand has increased enough to raise the prices to ‘pierce’ the initial loss.

Criteria:

The first candle is bearish, and the second candle’s opening price gaps down. However, it closes above the middle of the first candle at the end of the day.

 

Bullish Candlestick Sandwich

 

Image Taken From: Humble Traders

The Bullish Candlestick Sandwich pattern is the final reversal pattern that we are covering. A 3-candlestick pattern, it derives its name from its appearance: a green candle sandwiched between 2 red candles, and is seen at the bottom of a downtrend.

Reasoning:

The first candle demonstrates that bears are in control, and are pushing the lows. The second candle gaps up to shows an unexpectedly high opening price, and closes at an even higher price. At this point, traders are cautious of a trend reversal. The third candle’s opening price gaps up, but closes at the same price levels as the first; this indicates that a support price has been found and established, and the start of a bull run.

Criteria:

The first and third candles are bearish, and close at about the same price. The second candle is bullish, and trades are conducted above the closing price of the first candle.

 

Conclusion

In this bear market, all investors are eagerly awaiting these signs to indicate the end of this downward trend. For those of you who have investments, keep an eye out for some of these patterns!

 

Safe investing!

Mike

12 April 2018