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Day
15: Basic Stock Market Concepts
Technical
Analysis for Beginners:
1. What is a Dark Cloud Cover Candlestick
Pattern?
The
dark cloud candlestick pattern is a two candles bearish reversal candlestick
pattern appears at the end of an uptrend. Location is important. If it forms at
the resistance it signals a potential weakness in the uptrend can turn to be
possible trend reversal to the downside. In this pattern the 1st candle is
bullish and 2nd follow up candle is bearish. The pattern is formed with a
bearish candle that opens higher but closes below the 50%of the prior bullish
candle.
The
dark cloud cover candlestick pattern is mostly similar to the bearish engulfing
pattern. The only difference is in bearish engulfing pattern the 2nd session's
red candle engulfs the 1st session' green candle completely. In dark cloud
cover candlestick pattern the 2nd candle opens higher but closes below half of
the 1st candle. Both the patterns indicate bearish reversals.
2. What is a Piercing
Candlestick Pattern?
The
piercing candlestick pattern is a two candles bullish reversal pattern appears
at the end of an existing downtrend. Location is important. If it forms at
support it signals a possible trend reversal. The pattern includes the 1st
session opening near high and closing near the low with a long trading range.
The
piercing candlestick pattern is mostly similar to the bullish engulfing
pattern. The only difference is in bullish engulfing pattern, the 2nd session's
green candle engulfs the 1st session's red candle completely. Whereas, in
piercing pattern the 2nd session's green candle engulfs the 1st session's red
candle partially. The size of the engulfing is above 50% but less than 100%.
3. What is a Doji Candlestick Pattern?
The Doji candlestick
pattern is a single candle chart pattern that occurs when a candle's open price
is equal to close price with virtually no real body like spinning tops. Doji
provides crucial information about the market participant's sentiments. It
looks like a cross sign as '+' with tiny or no body with upper and lower wicks.
The colour of the candle does not matter. The Doji has similar implications as
the Spinning Top. Actually it is a neutral candlestick pattern or indicates
indecision in the market.
There are different
types of Doji. A few of the most famous are:
- Long-legged doji
- Gravestone doji
- Dragonfly doji
- Doji star.
4. What is Long-Legged Doji?
The Long-Legged
Doji pattern has a similar length of upper and lower wicks and a tiny
body.
The Long-Legged
Doji works best with the context of price action. Before formation of
Long-Legged Doji there must be a previous swing which we should look into
before planning a trade. It gives us a potential price reversal signal in a
defined up or down trend. If it is formed in a range-bound market it suggests
more consolidation.
If a Long-Legged Doji
is formed at the high in uptrend the price will fall, if Long-Legged Doji is
formed in downtrend the price will rise. You have to find it at the right spot.
5. What is Gravestone Doji?
A Gravestone Doji
candle is a pattern that indicates a bearish reversal may happen soon. This
pattern forms when the open, low and closed prices of an instrument are close
to each other and have long upper wick. It shows that the buyers tried hard to
push the prices higher but at the higher point sellers took the control of the
instrument and were able to bring down the price lower.
Gravestone means stone on the grave. Buyers are buried under the ground
and bears kept stone on the grave. Now price will fall.
6. What is Dragonfly Doji?
The dragonfly doji is
such a candlestick pattern that indicates a bullish reversal signal generally
appears at the bottom of a downtrend. The opposite of Gravestone Doji is
Dragonfly Doji. When in a downtrend at the bottom if a "Dragonfly
Doji" is formed, then the pattern has the most potential to work according
to the analysis. The downtrend indicates that the bear was in full control. But
at the bottom buyers made an attempt to push the price higher, the bears lost
the ground due the buying pressure.
7. What
is Doji Star Candlestick Pattern?
Doji star is a candlestick pattern
which is neither bullish nor bearish. It's a neutral candlestick pattern. It
has the same opening and closing prices, looks like a star. It indicates a
consolidation or range bound market.
8. What
is a Inverted Hammer?
The inverted hammer is such a
candlestick pattern that indicates bullish reversal signal that typically forms
at the bottom of a downtrend. This pattern is recognized by its small body,
long upper wick, and little or no lower wick. It indicates that the buyers
trying to gaining control over the market, but are facing potential
resistance also. If this type of pattern is seen at the uptrend it can
indicate a reversal in the downside or a pullback may happen.
9. What
is a Spinning Top Candlestick Pattern?
A Spinning top is a candlestick pattern that has a small real
body with long upper and lower wicks or shadows.
Like a doji it also indicates indecision about the future trend
of the market. However, the spinning top gives us useful information about the
current market condition. On the basis of this information traders can make
their positions in the market. We can see the spinning tops have small bodies
but long upper and lower wicks or shadows.
10.
What is Hanging Man Candlestick Pattern?
The hanging man is a
bearish reversal candlestick pattern which forms at the top or resistance of a
uptrend. It indicates a potential shift of market trend. It's just opposite of
inverted hammer. It has a small body at the top with little or no wick, and
long shadow in the lower side.
If you have any other questions in your mind relating to stock market basics or need any clarification, please put your query into the comment box, We will try our best to clarify the same
Disclaimer: The information provided on MoneyWiseMind is for educational and informational purposes only. It is not intended to be financial advice, and you should not rely on it as such. Before making any financial decisions, you should consult a licensed financial advisor.
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