In first part, you learned about Bullish Reversal Candlestick Patterns. In this, you will learn all the important Bearish Reversal Patterns.
Bearish Reversal Patterns
Bearish reversal candlestick patterns are the patterns, which changes the direction of the trend from Bullish to Bearish. All these pattern works best at resistance or supply lines.
1. Shooting Star
Shooting Star is a single candle reversal pattern which works best at the resistance or supply zone. You will see open and close of this candle roughly at same point. And it has a long upper shadow, which shows rejection from buyers, as buyers try to push the market higher.
First there will be an uptrend and you will see shooting star at resistance. When shooting candle open, buyers push the market higher. There comes a point when they stop buying, sellers takes over and pushed the market lower.
Basically it shows, first buyers were interested but then sellers takes over them. Color of this candle is not important.
You can enter into trade on next candle.
2. Hanging Man
Hanging man pattern is a single candle pattern, which forms at resistance and supply level.
First there will be an uptrend, then you will see this pattern. Close and opening of this candle will be roughly same and there will be a long tail on lower side.
Here works revers psychology of hanging man pattern. When this candle opens, sellers try to push the market lower. But then buyers comes and push market up. Here sellers come and that’s why it acts as a reversal candle.
You candle enter into trade, when the next candle closes below hanging man.
3. Bearish Engulfing
Bearish engulfing pattern is a two candle pattern. First candle will be small bullish candle and second candle will be a big Bearish candle. The first candle will be completely engulfed by second candle.
There will be an uptrend first, then you will see a small Bullish candle at the resistance and supply line. Which shows lack of buying pressure from buyers and act as a momentum shift candle. Then you will see a big Bearish candle, which engulfs first small bullish candle. Here sellers takes over the buyers.
You can enter at the close of second candle.
4. Bearish Harami
Bearish harami candle is a two candle pattern. First candle will be a big bullish candle and second candle will be a small Bearish candle. The second candle will be inside the body of first candle.
There will be an uptrend first and you will see a bullish candle at the support level. Which shows the buyers are in control. Then you will see a small Bearish candle, which shifts momentum of buyers. There mush be a gap down opening for second candle and it must close above the open of the first candle.
You can enter after close of second candle.
5. Tweezer Top
Tweezer top pattern is a two candle pattern. It forms at resistance and at supply zone. First candle will be any bullish candle and second candle will be any Bearish candle.
There will be an uptrend and you will see a first bullish candle at resistance. Second candle will be bearish, when second candle open, their open will be equal to the close of the first candle. Which shows the sellers are taking over buyers and not giving chance to move price higher.
You can enter in the trade after close of the second candle.
6. Dark Cloud
Dark Cloud is a two candle pattern, which forms at resistance and supply zone. First candle will be the bullish candle and second candle will be the Bearish candle.
First there will be an uptrend and you will see a bullish candle at support. The next candle will be the bearish candle. You will see a gap up opening for second candle because of previous uptrend. Close of the second candle must be below the 50% of the first candle, this shows the sellers are taking over buyers.
You can enter into trader at the close of second candle.
7. Evening Star
Evening star is a three candle pattern, which forms at the resistance and supply zone. First candle will be the bullish candle. Second candle will be the small Bearish candle and third candle will be the Bearish candle.
First there will be an uptrend and you will see first candle at resistance level. For second candle, there will be a gap up opening due to an uptrend. Size of the candle will be small, this candle will act as a momentum shift candle from bullish to neutral. Third candle will be the Bearish candle, which will act as confirmation candle for trend shift from neutral to bearish.
You can enter into trade at the close of third candle.
Final Thoughts
This was the second part of the candlestick patterns. You might have an idea about candlestick patterns and how they affect the price. In next or last part, you will learn about candlesticks continuation patterns,