After finish this Candlestick Patterns’ Technical Analysis: 4 Weak Bearish Reversal Signals article series, we will have the complete candlestick patterns as our arsenal to do stocks analysis in the right way. So far, we have discussed 25 Bullish Reversal Candlestick Patterns and 17 Bearish Reversal Candlestick Patterns. As for your information, Bullish Reversal chart patterns act as buy signals while Bearish Reversal chart patterns act as sell signals.
This time, let’s discuss about Bearish Reversal Candlestick Patterns which has low reliability. It means the technical analysis confirmations is a must in here. As for your information, so far, I have discussed the Strong Bearish Reversal Candlestick Patterns and Medium Strength Bearish Reversal Candlestick Patterns in this blog. Therefore this article series will complete our stocks analysis arsenal with the last four of Bearish Reversal Signals.
Candlestick patterns have four Bearish Reversal Signals which are Bearish Hanging Man, Shooting Star, Bearish Harami, and Bearish Belt Holt. In this part I, let’s focus to discuss the Bearish Hanging Man Candlestick Patterns and Bearish Shooting Star Candlestick Patterns.
Technical Analysis of Bearish Hanging Man Candlestick Patterns
Bearish Hanging Man is a single candlestick patterns which only needed one candlestick to form the chart pattern. Bearish Hanging Man candlestick patterns consists of a one candlestick with short body and long tail down which is happened after a long/significant up trend (bullish). For more detail, let’s take a look at the picture below:
As we can see, after a long/significant up trend (bullish), there is a candlestick with short body and long tail down. If alone, this chart pattern is known as hammer candlestick patterns but since happened in the top of a long/significant up trend (bullish), the chart pattern is called as hanging man pattern. For this candlestick patterns, the body color is not significant. The significant one is the body length and the tail. The short body and the long tail down tell us that the buyers has start to lose their power while the sellers start to push the stocks market down.
The down long tail tells us that the sellers has gain a lot of power during the trading range but finally, the buyers still has the remain power so the opening and closing price range is short. It is a signal for indecisive situation indeed. However since happened after a long/significant up trend (bullish), the chart pattern is considered as a sign which tells us the the sellers may rule the stocks market in the next trading range.
Obviously, we have a bearish/sell signal in here. However, the signal is a weak one so we need to wait for the technical analysis confirmations before start to sell our stocks/shares on stocks market. The confirmations can be from the candlestick itself or other Technical Analysis (TA) Indicators such as MACD, Fibonacci, Bollinger Band, or any others. In this article, let’s utilize the candlestick as the confirmation. The candlestick based confirmation will be looked as below:
In picture above, I have added a solid black candlestick and a technical analysis confirmation line. As we can see, the stocks market is considered in down trend (bearish) if in the next trading range, there is a solid black candlestick with lower closing price than the opening price of white candlestick which happened right before the hanging man candlestick patterns. Please be noted that the confirmation black candlestick mustn’t right after the hanging man pattern but can be in various time.
This technical analysis confirmation tells us that the sellers has finally ruled the stocks market in the full power and it is high possibility that the market will be pushed down in the next trading range. So, it is obvious that we should sell our stocks – either to realize our current profit or to cut our loss minimum.
Technical Analysis of Bearish Shooting Star Candlestick Patterns
Bearish Shooting Star is a single candlestick patterns which is only needed one candlestick to form the chart pattern. Bearish Shooting Star is a opposite pattern of Bearish Hanging Man chart pattern. Bearish Shooting Star consists of a candlestick with short body and long tail up. For more detail, let’s take a look at the picture below:
As we can see, after a long/significant up trend (bullish), at the top, there is a candlestick with short body and long tail up. If alone, this chart pattern is known as the inverted hammer which tells that the market is in stagnant condition. However, since happened after a long/significant up trend (bullish), this candlestick patterns tell us that the stocks market may already reach its top price and start to reverse. The body color is not significant in here.
The significant factors are the body length and the up long tail. The up long tail tells us that the buyers still try to push the stocks market up during the trading range but not have enough power to maintain price in its highest level. The short body tells us that the buyers power has decreased significantly while the sellers start to gain their power. It means there is a possibility that the sellers will rule the stocks market in the next trading range.
So, it is obvious that we have a bearish/sell signal in here. However, the signal’s reliability is quite low so we need to wait for the technical analysis confirmations before decide to sell ours stocks/shares on stocks market. The confirmations can be from the candlestick itself or from other Technical Analysis (TA) Indicators such as Volume, GMMA, Money Flow Index, etc. For this article, let’s use the candlestick based confirmation as below:
I have added a solid black candlestick and a technical analysis confirmation line in picture above. As we can see, the stocks market is confirmed in down trend (bearish), if in the next trading range, there is a solid black candlestick with lower closing price than the opening price of the white candlestick which is happened before the shooting star candlestick patterns. Please be notified that this confirmation black candlestick mustn’t be happened right after the shooting star pattern but can be in various time.
This technical analysis confirmation tells us that the sellers has finally ruled the stocks market powerfully and there is high possibility that it will be down in the next trading range. Obviously, the technical analysis of Bearish Shooting Star Candlestick Patterns tell us it is the right time to sell our stocks on the stocks market.
Have a great stocks trading day everyone!