Bullish patterns are those that occur when prices make a sudden move higher. They often begin with a long white day. Then, small real bodies follow. Then, a fourth long white day occurs, followed by a series of shorter red candles. The fifth day begins with another long white day. As the price moves lower, the second candle falls but does not break through the previous low. This pattern signals an uptrend is about to end. Bull traders then prepare for the next move up.
Another example of a bullish pattern is the Bullish Three White Soldiers. This pattern appears when the market starts to turn. The three candles in this pattern all have a body that is smaller than the first. This signal is considered a bullish one because it shows a market reversal. However, bears should be cautious when trading this pattern, as it may attract short sellers who will attempt to push the price down.
Three Black Crows. This pattern is easily recognizable by its appearance in the form of three red candlesticks in an uptrend. The first candle has a red body, while the second one is a larger green body. Typically, the shadows of the two candles are short. The engulfed candle signals strong buying pressure. However, this pattern does not occur in all markets, and it should only be used in conjunction with other patterns to help traders trade in the market.
Hammer Candlestick. This pattern is easily identifiable and is a combination of red and green candles. The hammer is formed when the market reaches the bottom of a downward trend. This pattern usually means strong buying pressure during the day. The opposite is true for the inverse hammer, which is a long red candle followed by a short green candle. The hammer also signifies a bullish trend. It is usually difficult to predict the direction of a bearish trend.
Bearish Harami: This pattern appears at the bottom of a downtrend. A bearish harami is the bullish version of a hanging man. The wick of a bearish candlestick must be long and the shadow of the second candle must belong. It indicates a downward trend but also suggests a pause. It is the opposite of an upside-down bearish harami. The bottom candle of the pattern is short but has a long shadow.
Bullish Reversal Candlesticks. Bullish reversal candlesticks form at the bottom of a downtrend and signal a price reversal. A 1-candle pattern signals a bottom or a support level. A long lower shadow signifies a bullish hammer. The hammer does not matter which color it is, but the long lower shadow indicates a bullish trend. With these candlestick patterns, traders often consider the reversal of trends. If a bullish hammer forms, it can initiate a long position.