(Input for this tutorial came from Robert W. Colby, author of The Encyclopedia of Technical Market Indicators, and the Technical Analysis Institute book, Japanese Candlestick Charts)
Candlestick charts provide a more visual presentation of price action than traditional bar charts and have become the chart of choice for many technical analysts.
One candlestick itself can provide important information about the strength or weakness of the market during a given day or other time period, depending where the close is relative to the open. However, a candlestick pattern usually takes several candlesticks to produce chart formations that give the best signals.
The key in candlestick chart analysis is where a given candle or candlestick formation occurs during the market action. Candlesticks may look identical but have an entirely different meaning after an uptrend than they do after a downtrend.
Because they can be used in analysis in much the same way as bar charts, candlestick charts have quickly become a favorite of traders and analysts since being introduced to the West in 1990. Candlestick analysts have also added a little mystique to candlestick charts by giving various patterns clever names and providing more descriptive characteristics for these patterns than is the case in typical bar chart analysis. Both types of charts have their double tops, inside days, gaps and other formations. But candlestick analysis ascribes more meaning to the candlestick "bodies" – price action between the open and close – and to the "shadows" or "tails" – price action that takes place outside of the open-close range for a period.
Because of their popularity in recent years, you should become acquainted with the nuances and terms of candlestick charts if you aren't already.
Candlestick Chart Basics
Japanese candlestick chart pattern recognition has been meticulously refined over hundreds of years of actual experience by Japanese traders, becoming a technical tool of great and growing significance around the world in recent years.
Japanese candlestick charts have caught on rapidly in the West since 1991, when Steve Nison published the first book written in the English language on the subject, Japanese Candlestick Charting Techniques: A Contemporary Guide to the Ancient Investment Techniques of the Far East. He added another book a few years later, Beyond Candlesticks: More Japanese Charting Techniques Revealed. In 1992, Greg Morris thoroughly described and quantitatively tested candlestick patterns and found that many were highly accurate in his book, now titled Candlestick Charting Explained. A number of other books have been written on candlestick charts since then.
According to Morris, Japanese candlestick pattern recognition is based on 160 rules that Munehisa Honma developed from 1750 to 1803. Honma owned a great rice field near Sakata, on the west coast of northern Honshu. He traded rice with such expertise that he grew extremely wealthy. His trading rules became known as Sakata's Method, Sakata's Law and Honma Constitution. Honma emphasized the importance of trading in harmony with the trend. After a price rise, however, price eventually must fall: it takes more force to cause price to rise than to fall. When there is no trend, stand aside in trading range markets.
East Meets West
Candlestick charts have been adopted quickly and easily in the West because they have many similarities to the long-familiar bar charts. All the long-established Western chart pattern recognition methods can be applied directly without modification to candlestick charts. And most computer programs can construct candlestick charts just as easily as bar charts. When plotting by hand, candlestick charts take just a little more time than a bar chart. The colorful and exotic names and Eastern mystique adds to the appeal of candlestick charts.
Nison believes that candlestick charts can offer signals in advance of traditional Western bar charts: Candlestick charts can reveal a trend change in fewer trading sessions, offering timing advantages. Still, “relying on Japanese candlestick charts alone is like leaning your ladder against a cloud,” Nison cautions. The major trend is more important than a few candlesticks. Rather than narrowing his focus to any one tool, Nison wisely emphasizes a “trading triad,” a combination of (1) sound money management discipline, (2) Western technical analysis methods for analyzing trends and patterns and (3) Japanese candlestick chart interpretation.
Three is a recurring number in both Japanese and Western technical interpretation. Contratrend corrections often run for three candlesticks. A narrowing of price range and length of real bodies over three candlesticks signify a loss of momentum and warn of a probable price reversal. Many reversals require three candlesticks or three movements or three failed attempts at trend progress before changing direction.
Like R. N. Elliott, the Japanese independently recognized three impulse waves advancing a wave of larger degree. Also, like Charles Dow and his successors, the Japanese independently recognized three psychological phases of a bull market (skepticism, growing recognition and enthusiasm) and three phases of a bear market (denial, fear and disgust). That traders and technical analysts from opposite sides of the world and working in isolation arrived at similar interpretations might imply that there is something here that is universal and very basic to human behavior.
Constructing Candlestick Charts
Japanese candlestick charts can be drawn for any time period. The most popular time interval to plot is one day, with its obvious and readily available open, close, high and low prices. Short-term traders may choose to plot time intervals measured in minutes. For example, a 30-minute candlestick chart could divide the 6.5 hours of the New York Stock Exchange trading day into 13 intervals, using the first price in each half-hour interval as the open and the last price in each half-hour interval as the close.
Longer-term investors consult weekly candlestick charts, using Monday's open and Friday's close to define a weekly candlestick chart's real body. Monthly candlestick charts are constructed using the first trading day of the month's open and the last trading day of the month's close to define the monthly real body.
Japanese candlestick charts are fully compatible with Western charting techniques because they are nearly the same as Western bar charts, except that the range between the opening and closing prices is highlighted and given special emphasis in candlestick chart interpretation. The high and the low price for a period are represented exactly the same way in both Western bar charts and candlestick charts.
Source: VantagePoint Intermarket Analysis Software
The real body is the price range between the period's open and close. This is drawn as the widest part of the candlestick chart. The real body is either white or black, signifying buying or selling dominance after the open. (Of course, with some of today's analytical software, you can choose any colors you wish.) The contrasting shading (white or black) helps traders perceive changes in the balance of market forces between buying (white) or selling (black) dominance.
White candlestick: If the close is higher than the open, the real body is white. A white (Yang) candlestick indicates buying dominance after the open.
Black candlestick: If the close is lower than the open, the real body is filled in black. A black (Yin) candlestick indicates selling dominance after the open.
The real body is the most important part of each candlestick. The shade (white or black) and length of the real body reveals whether the bulls or bears are dominant during the main period of trading. A long white real body implies that the bulls are in charge. A long black real body implies that the bears are in charge. Candlesticks with very small real bodies, where the difference between the open and close are relatively tiny compared to normal trading ranges, imply that neither side is currently in charge and, furthermore, that the previous trend may be worn out.
Shadows are the part of the price range that lies outside the real body's open-to-close price range. Shadows are represented as thin lines extending from the real body to the extreme high and low prices for the period, above and below the real body. The peak of the “upper shadow” is the high of the period, while the bottom of the “lower shadow“ is the low of the period.
Marubozu lines lack shadows at one or both extremes: The open and/or the close is the extreme high or low price of the period. Major Yang Marubozu lines have the close equal to the extreme high and indicate extreme buying, which is bullish. Major Yin Marubozu lines have the close equal to the extreme low and indicate extreme selling, which is bearish. When the opening is the low, there is buying dominance during the period, which is bullish. When the opening is the high, there is selling dominance during the period, which is bearish.
The length and position of the shadows are meaningful. A tall upper shadow implies that the market rejected higher prices and is heading lower. A long lower shadow implies that the market rejected lower prices and is heading higher. Very long shadows, both upper and lower, are known as high-wave lines, and these indicate that the market has lost its sense of direction. Multiple high-wave lines indicate trend reversal.
Indecision and Continuation Patterns
Individual candlesticks or candlestick patterns tend to be most useful in helping to spot market reversal tops or bottoms, but they can also provide information as a trend is unfolding. Some candlesticks suggest that bullish and bearish traders may have achieved some kind of balance and the market can't decide which way to go next, or the candlestick pattern may just be setting up to continue the trend that is already in place. “Windows” (gaps to Westerners) could indicate either.
| Indecisive Candlesticks
Perhaps the best-known candlesticks reflecting an indecisive market are a group of individual candlesticks known as doji. A doji has no real body – that is, the open and the close are equal. A doji indicates no net price movement from the first price to the last price recorded during the predefined time interval that formed the candlestick. A doji indicates a lack of progress, a standoff, and an equal balance between the forces of supply and demand. A doji also implies uncertainty about the trend. | 
|
Bullish Doji | Bearish Doji |
The bulls and bears are said to be in a "tug of war" that has reached a standstill. The implication is that whatever trend that existed before the doji now has lost momentum and is vulnerable to correction or reversal so it may be either a bullish or bearish candlestick, depending on its location on the chart. Doji are frequently seen as part of a larger pattern.
Long-legged doji has very long upper and lower shadows and indicates a trend reversal.
Rickshaw man is a specific type of long-legged doji where the open and close are in the middle of the price range.
 | Dragonfly doji has a long lower shadow and no upper shadow. Following an uptrend, it indicates a bearish trend reversal. |
Four price doji has only one price for the period – that is, the open, high, low and close prices are all the same. It indicates an unusually quiet market.
 | Gravestone doji has a long upper shadow and no lower shadow – that is, the open and close are at the low of the period. Following an uptrend, the longer the upper shadow, the more bearish the indication. Following a downtrend, the gravestone doji can indicate an upside reversal, but that requires a bullish confirmation in the following period. |
Tri-Star is a rare but significant reversal pattern formed by three dojis, the middle one a doji star that gaps away from the previous period's doji. Tri-Star often follows a trend of long duration that has run its course. The three dojis clearly indicate a loss of momentum and an exhaustion of the existing trend.
 | Spinning Top
A spinning top is similar to a doji, but it has a real body – that is, the open and close are not the same – and shadows that are longer than its real body. The shade (white or black) of the real body is unimportant. Spinning tops indicate indecision, a standoff of bullish and bearish forces. Several spinning tops together often mark a point of price trend change. |
Continuation Patterns
A continuation pattern suggests that the trend in place should stay in place or resume. Flag formations and triangles in Western analysis are pauses or consolidation areas where the market seems to take a little breather to let prices adjust to conditions. Candlestick charts also feature similar patterns.
 | Rising Three Methods
The rising three methods pattern occurs in an uptrend and is composed of five candlesticks. The first is a long white candle. The next three periods produce three small real bodies, two of which are black and all of which are contained within the range of the first long white body. The fifth candlestick is another long white candlestick that closes at a new high and confirms resumption of the uptrend. |
 | Falling Three Methods
The falling three methods pattern occurs in a downtrend and is composed of five candlesticks. The first is a long black candle. The next three periods produce three small real bodies, two of which are white, and all of which are contained within the range of the first long black body. The fifth candlestick is another long black candlestick that closes at a new low and confirms resumption of the downtrend. |
Separating lines bullish | 
Separating lines bearish |
Separating Lines
Separating lines are a continuation pattern in either an uptrend or downtrend. In an uptrend, a black candlestick is followed by a white candlestick with the same opening price. In a downtrend, a white candlestick is followed by a black candlestick with the same opening price. In either case, the existing trend continues.
 | Bullish on Neck Line and in Neck Line
Bullish on neck line and in neck line candlesticks are small one-day contratrend reversals that do not amount to much. In an uptrend, there is a gap up open followed by some continuation up to a new high. A mild reversal by the close produces a black candlestick, but the downward movement is not enough to produce a negative net price change close to close. The uptrend resumes the next session. Bearish on Neck Line and in Neck Line
Similarly, bearish on neck line and in neck line candlesticks are small one-day contratrend reversals that do not amount to much. In a downtrend, there is a gap down open followed by some continuation down to a new low. A mild reversal by the close produces a white candlestick, but the upward movement is not enough to produce a positive net price change close to close. The downtrend resumes the next session. |
Side-by-Side White Lines
Side-by-side white lines occur after a window (gap) within an existing trend, up or down. The second line is an inside day, with a lower high and higher low. This marks consolidation, and the existing trend quickly resumes.
Windows
The window, known as a gap in the West, occurs anytime when the current price range does not overlap the previous period's price range. Windows are usually continuation patterns indicating the existing trend before the window is likely to continue after the window. For the trend to continue, the window should function as a support in an uptrend or as resistance in a downtrend. The window should not be closed, or filled in, on a closing price basis. If the window is closed on a closing price basis, the trend is over.
Source: VantagePoint Intermarket Analysis Software | Windows are very powerful and important indications of demand and supply. Windows following congestion patterns validate the new trend direction, giving the same signal as Western breakaway gaps. Rising Window
For a rising window, the current period's low is higher than the previous period's high, leaving an upside gap on the chart. A downward reaction or correction against the uptrend is likely to find support within the window – that is, the previous period's high should offer support to any downward reaction against the uptrend. Falling Window
For a falling window, the current period's high is lower than the previous period's low, leaving a downside gap on the chart. An upward reaction or correction against the downtrend is likely to find resistance within the window – that is, the previous period's low should offer resistance to any upward reaction against the downtrend. |
Tasuki gap bottom
| Tasuki Gap
Tasuki gap is the name of a brief, contratrend retracement that may enter the area of a recent window but does not close the window on a closing price basis. | 
Tasuki gap top
|
Meeting Line
Meeting line is defined by a window (gap) in the direction of the prevailing trend on the open, but the close reverses to meet the previous period's close. This should not happen if the trend is to continue, so the trend is likely to reverse.
Source: VantagePoint Intermarket Analysis Software
Three Windows
Three windows often signal the end of a move. The first gap is the breakaway gap that initiates a move. The second gap is a continuation gap or measuring gap that often occurs halfway into a move. The third gap is an exhaustion gap that occurs at the end of a move. Three falling windows are three downside gaps followed by a bullish white candlestick to indicate selling pressure is exhausted. Three rising windows are three upside gaps followed by a bearish black candlestick to indicate buying pressure is exhausted.
Candlestick Reversal Bottoms
In addition to depicting the trading action during a given time period more visually, candlestick charts also provide a more visual picture of price reversal patterns signaling the market may be ready to start a new trend.
One candlestick itself can provide important information about the strength or weakness of the market during a given day or other time period and can suggest a price turn. However, it typically takes several candlesticks to produce chart formations that give the best candlestick signals. Of course, much depends on where a given candle or candlestick formation occurs during the market action, a point that cannot be emphasized too much, as candlesticks may look identical but have a different meaning after an uptrend than they do after a downtrend.
Here are some candle signals at a bottom suggesting the previous downtrend should reverse into a bullish uptrend.
 | Hammer or Shaven Head
The hammer (takuri) is a bullish reversal pattern occurring within an established downtrend. It has a small real body (white or black) at or near the high (thus, little or no upper shadow), and it has a long lower shadow, which implies that extreme low prices were rejected by the market. The hammer's small real body implies the previous downtrend is losing momentum. The market can be said to be hammering out a base. Another name applied to a candlestick (white or black) with no upper shadow is shaven head. |
 | Inverted Hammer or Shaven Bottom
The inverted hammer is a bullish reversal pattern that follows a downtrend. It has a small real body (white or black), long upper shadow (longer than the body) and little or no lower shadow. This pattern is confirmed the next day by a strong upside gap on the open followed by further substantial upside movement to form a large white real body. Another name applied to a candlestick (white or black) with no lower shadow is shaven bottom. |
 | Bullish Engulfing Pattern
The bullish engulfing pattern is a major bottom reversal signal pinpointing a trend change from bearish to bullish. It is a two-candlestick pattern where a small black body for the previous period is followed by and contained within a large white body for the current period, which engulfs one or more previous candlesticks. |
 | Piercing Pattern
The piercing pattern (or piercing line) is similar to the engulfing pattern, but the signal candlestick does not engulf the previous candlestick. Following a long black candlestick for the previous period, the price gaps lower on the open for the current period, below the previous low. Later, the price reverses strongly upward to close above the midpoint of the previous period's black real body. The higher the current close relative to the previous period's black real body, the more meaningful is the piercing pattern. The strong price reversal demonstrates that the extreme low price on the open was rejected by the market and implies that the balance of power has shifted to the bulls. |
Stars
Stars are reversal patterns that can signal either a top or bottom, depending on the previous price trend. There are three main bullish stars that follow and reverse a downtrend.
 | The morning star is a major bottom reversal signal following a decline. It is comprised of three candlesticks: (1) a long black candle; (2) a gap-lower open and a small real body (black or white) that should be entirely below and not touching the real body of the first candlestick, and (3) a large white real body that closes well into the long black body of the first candlestick. The longer this third white real body, the more meaningful it is. Also, a volume surge on this white real body would add power to the reversal signal. If the middle candle is a doji, the pattern is called a morning doji star and is said to be more meaningful than an ordinary morning star. |
 | If the middle doji's shadows are completely below without touching the shadows of the first and third candlesticks, the pattern is called an abandoned baby bottom and is considered to be even more significant. |
 | Bullish Harami
The bullish harami, like the star, is a reversal pattern that can occur at either a top or bottom. The bullish version follows a downtrend with a long black real body for the previous period. The current period produces a short white real body, where the current close is relatively near the open, and both close and open are contained completely within the previous period's long black real body. There should be immediate upside follow-through the next period for confirmation. |
 | Bullish Harami Cross
The bullish harami cross is a major reversal pattern similar to the bullish harami, but in a downtrend, a long black real body is followed by a doji (open and close at the same price giving a cross-like appearance) that is contained within the large black body. |
 | Three White Soldiers
Three white soldiers reverse an existing downtrend. Look for three relatively large, consecutive white candles that close near or at their highs of the period. |
 | Belt Hold
The belt hold appears in a downtrend when prices open much lower on a large window (gap) but then close substantially higher, recovering most of the early loss. |
 | Bullish Counterattack Line
In a downtrending market, a large black candlestick is following by a large white candlestick that opens on a big gap lower and then rallies during the period to close at the same price as the previous close. The bullish white candlestick needs followup action to the upside to confirm the turn to an uptrend. |
Three Inside Up
Three inside up is composed of three candlesticks. Following a prevailing downtrend, the first is a large black candle. This is followed by a short white candle that is contained entirely within the real body of the previous big black candle. This suggests some loss of downward price momentum. The third candlestick is a large white candlestick that closes above the highs of the previous two candlesticks, thus confirming a bullish change in trend direction.
Three Outside Up
Three outside up is also composed of three candlesticks following a prevailing downtrend. First look for a black candlestick. This is followed by a larger white candlestick that is an engulfing line – that is, its real body contains the entire first period's price range. This alone suggests a change in downward price momentum. The third candlestick is a large white candle that closes above the highs of the previous two candlesticks, thus confirming a bullish change in trend direction.
Ladder Bottom
Ladder bottom reverses a bearish downtrend. After three consecutive and decisive selling sessions forming three substantial black candles, there may be some slowing of downward momentum in the fourth period. The trend change from bear to bull is confirmed in the fifth period by a relatively large white candlestick that closes on its high and at a new high relative to the most recent past three periods.
Kicking
Kicking is a two-day bear trap. Following a decisive day of selling where prices open on their highs and close on their lows, forming a substantial black candlestick with no shadows, prices totally reverse on the open the very next day, forming a rising window on a large upside opening price gap. Prices close that day on their highs, forming a substantial white candlestick with no shadows. The bears can't help but suffer big losses, and they are likely to be squeezed further in the days ahead, with the market showing no mercy. The bears suffer a severe kicking.
 | Tweezer Bottoms
Tweezer bottoms are two or more candlesticks with matching bottoms. The bottoms do not have to be consecutive, and size and color are irrelevant. It is a minor reversal signal that becomes more important when part of a larger pattern. |
Three Valleys and Three Rivers
Three valleys bottom and three rivers bottom are longer-term patterns similar to the western world's triple bottom. A buy signal is confirmed when the price rises above the intervening two rally tops, preferably on a strong, large white candlestick or a rising window (breakaway gap) and a rise in trading volume to indicate strong buying.
Inverted Three Buddha Bottom
Inverted three Buddha bottom is a longer-term pattern similar to a western inverted head-and-shoulders bottom. A buy signal is confirmed when the price rises above the intervening two rally tops, preferably on a strong, large white candlestick or a rising window (breakaway gap) and a rise in trading volume to indicate strong buying.
 | Fry Pan Bottom
Fry pan bottom is a western rounding bottom, where a buy signal is validated by a rising window (breakaway gap) to indicate strong buying. |
Candlestick Reversal Tops
Candlesticks with similar appearances can signal much different outcomes, depending on whether the individual candle or candlestick formation occurs after an extended downtrend or uptrend or in the middle of a trend. Here are some candlestick signals at tops that suggest the previous uptrend may be ready to reverse into a bearish downtrend.
 | Hanging Man
The hanging man is a bearish reversal pattern occurring within an established uptrend. It has a small real body (white or black) at or near the high; therefore, it has little or no upper shadow. Although the color of the real body is not critical, black is more bearish than white. Also, it has a long lower shadow, like legs dangling down from the body. The hanging man's small real body implies the previous uptrend is losing momentum. The next period’s action would confirm the bearish implications of the hanging man if there is a downward window (gap) or a long black candlestick. |
 | Bearish Engulfing Pattern
The bearish engulfing pattern is defined as a current large real body enveloping a smaller white real body formed by price action during the previous period. Supply overwhelms demand. The bulls are immobilized. |
 | Dark Cloud Cover
The dark cloud cover is a decisive black candlestick following a strong white candlestick with an opening gap up to a new high, a reversal and weak close well into the previous white real body. The weaker the second black candlestick’s close, the more meaningful and bearish it is. For example, a close near the low of the current black candlestick and below the midpoint (or lower) of the previous white real body would be significant. This candlestick indicates bulls led a charge up the mountain to new price highs but could not hold the ground. Now the bears are pushing them back down the mountain. Dark cloud cover is the opposite of the piercing line. |
Stars
Stars are reversal patterns. There are four main bearish stars that follow and reverse an uptrend.
 | The shooting star has a long upper shadow, a small real body at the lower end of the price range and little or no lower shadow. After an upward move in previous sessions, a strong rally from the open occurs, but the market rejects the high prices and prices collapse back down to close near the open. This means that after early buying enthusiasm on the open, the rally attempt proved unsustainable, an obvious failure of demand. It is more significant if the current open gaps up from the previous real body. |
 | More significant is the more complex evening star, which comprises three candlesticks: First, a long white candle; second, a gap-higher open and a small real body (black or white), which should be completely above but not touching the real body of the first candle; and third, a black real body that closes well into the white body of the first candlestick. The longer this third black real body, the more meaningful it is. A volume surge on this third black real body would add power to the reversal signal. |
If the middle candle is a doji, the pattern is called an evening doji star, which is more significant than an ordinary evening star.
 | If the middle doji’s shadows are completely above and do not touch the shadows of the first and third candlesticks, the pattern is called an abandoned baby top and is even more significant. |
Tri-Star is a rare but significant reversal pattern formed by three dojis, the middle one a doji star that gaps up and away from the previous period’s candlestick. Tri-star often follows a trend of long duration that has run its course. The three dojis clearly indicate a loss of momentum and an exhaustion of the trend.
 | Bearish Harami
The bearish harami is a reversal pattern following an uptrend, formed a long white real body during the previous period and a short black real body during the current period where the current close is relatively near the open, and both close and open are contained completely within the previous period’s long white real body. There should be immediate downside follow-through in the next period for confirmation. |
 | Bearish harami cross is a major reversal pattern. In an uptrend, a long white real body is followed by a doji, and that doji is contained within the previous large white body. |
 | Two Crows
Two crows reverse an existing uptrend. First, there appears a relatively small black candlestick that signals a loss of upside momentum. That small black candlestick is immediately followed by a much more substantial black candlestick, which confirms a bearish change in momentum. |
 | Three Black Crows
Three black crows more decisively reverse an existing uptrend. Look for three relatively large, consecutive black candlesticks that close near or at their lows of the period. If the three candlesticks are identical, the pattern is called identical three black crows. |
 | Belt Hold
Belt hold, in an uptrend, forms when prices open much higher on a large window (gap) but close substantially lower, giving up most of the early gain. |
 | Bearish Counterattack Line
In an uptrending market, a large white candlestick is following by a large black candlestick that opens on a big gap higher and then slumps back during the period to close at the same price as the previous close. The bearish black candlestick needs followup action to the downside to confirm the turn to a downtrend. |
Three Inside Down
Three inside down is composed of three candles. Following a prevailing uptrend, first look for a large white candlestick. This is followed by a short black candlestick, which is entirely contained within the real body of the previous big white candlestick. This suggests some loss of upward price momentum. The third candlestick is a large black candlestick that closes below the lows of the previous two candlesticks, thus confirming a bearish change in trend direction.
Three Outside Down
Three outside down is also composed of three candlesticks. Following a prevailing uptrend, first look for a white candlestick. This is followed by a larger black candlestick, which is an engulfing line – that is, its real body contains the entire previous period’s price range. This alone suggests a change in upward price momentum. The third candlestick is a large black candlestick that closes below the lows of the previous two candlesticks, thus confirming a bearish change in trend direction.
Kicking
Kicking can also be a two-day bull trap. Following a decisive day of buying where prices open on their lows and close on their highs, thus forming a substantial white candle with no shadows, the very next day prices totally reverse on the open, forming a falling window on a large downside opening price gap. Prices close that day on their lows, forming a substantial black candle with no shadows. The bulls can’t help but suffer big losses, and they are likely to be punished by further price weakness in the days ahead, with the market showing no mercy. The bulls suffer a severe kicking.
Deliberation
Deliberation occurs in an uptrend with a three white candlestick pattern where the first two are substantial but the third is small. This indicates a loss of upward momentum, as if the market is preparing for a trend change from up to down.
Advance Block
Advance block occurs in an uptrend when there are three consecutive white candlesticks with the second and the third both exhibiting a smaller price range and real body than the previous one, thus indicating diminishing upward price momentum.
Ladder Top
Ladder top reverses a bullish uptrend. After three consecutive and decisive buying sessions forming three substantial white candlesticks, there may be a noticeable slowing of upward momentum in the fourth period. The trend change from bull to bear is confirmed in the fifth period by a relatively large black candlestick that closes on its low and at a new low relative to the most recent past three periods.
 | Tweezer Tops
Tweezer tops are two or more candlesticks with matching tops. The tops do not have to be consecutive, and size and color are irrelevant. It is a minor reversal signal that becomes more important when part of a larger pattern. A sell signal is confirmed when the price falls below the intervening two minor pullback lows, preferably on a large black candlestick or a falling window (breakaway gap) and a rise in trading volume to indicate serious selling. |
Source: VantagePoint Intermarket Analysis Software
Three Buddha Top
Three Buddha top is a longer-term pattern similar to a Western head-and-shoulders top. A sell signal is confirmed when the price falls below the intervening two minor pullback lows, preferably on a large black candlestick or a falling window (breakaway gap) and a rise in trading volume to indicate serious selling.
Three Mountains Top
Three mountains top is a longer-term pattern similar to a Western triple top. A sell signal is confirmed when the price falls below the intervening two minor pullback lows, preferably on a large black candlestick or a falling window (breakaway gap) and a rise in trading volume to indicate serious selling.
 | Dumping Top
Dumping top is a longer-term pattern similar to a Western rounding top, where a sell signal is validated by a falling window (breakaway gap) to indicate overwhelming supply. |
Eight New Price Lines
Eight new price lines is a chart pattern consisting of eight new price highs. This implies an overbought market where profit-taking would be appropriate.
Quick Guide to Main Patterns
Candlestick charts give a more visual presentation of price action than traditional bar charts and have become the chart of choice for many technical analysts.
One candle itself can provide important information about the strength or weakness of the market during a given day or other time period, depending where the close is relative to the open. However, a candlestick pattern usually takes several candles to produce chart formations that give the best signals.
The key in candlestick chart analysis is where a given candle or candle formation occurs during the market action. Candlesticks may look identical but have an entirely different meaning after an uptrend than they do after a downtrend.
The diagrams and descriptions below cover only some of the main candlestick patterns, showing the bullish version on the left and bearish version on the right. There are many other candlestick patterns with clever names that chart analysts use.
