As I have mentioned before, beside the Bullish Candlestick Patterns, the Bearish Candlestick Patterns are also very important in stocks analysis. The Bearish candlestick patterns tell us the time to sell the stocks so our profit is maximum or our loss is minimum. It can be said that the Bullish candlestick patterns tells us the best time to buy the stocks while the Bearish candlestick patterns tell us the best time to sell the stocks — either to realize the profit or to cut the loss.
As I mentioned in disclaimer, the stocks market is always right which means that the benefit potential can also turn to be the loss. For this situation, the Bearish Reversal candlestick patterns are also important since can tells us the best time to cut our loss before it become worst. Before, we have discussed one of the Strong Bearish candlestick patterns, the Bearish Dark Cloud Cover Candlestick Patterns. This time, let’s discuss other two strong bearish candlestick patterns which are Bearish Abandoned Baby Candlestick Patterns and Bearish Evening Star Candlestick Patterns.
Technical Analysis of Bearish Abandoned Baby Candlestick Patterns
Bearish Abandoned Baby is the three candlestick patterns which is needed three candlesticks to form the chart pattern. Bearish Abandoned Baby Candlestick Patterns consists of one solid white candlestick, a doji star, and a solid black candlestick as below:
As we can see, after a long/significant up trend (bullish), there is a solid white candlestick which is followed by the doji star, and then a solid black candlestick. The doji star has a gap for both of the white and black candlestick. This chart pattern is called as the Bearish Abandoned Baby Candlestick Patterns. Indeed, this chart pattern can be happened in various trading range time but for the sake of simplicity, let’s assume the pattern is happened in daily basis.
In the first day, after a long/significant uptrend (bullish), the buyers still have full power to push stocks market up which shown by the solid white candlestick with long body. This first day candlestick tells us that the bullish is strongly continuous if there is nothing happened in the next day. Unfortunately, there is a doji star with a significant gap up in the second day. The gap tells us that the buyers still try to push the stocks market up but – whether it is because of buyers losing power or sellers gaining power –the buyers cannot push the stocks market up anymore so the closing price as same as the opening price.
Indeed, a doji star alone is a neutral signal which tells us that the stocks market is indecisive moment since the buyers and sellers has the same power. However since happened after a long/significant up trend (bullish), this doji star tell us that the buyers has started to lose their power and sellers is ready to counter-attack. And then, there is a solid black candlestick in the third day. There is a gap between the doji star and the black candlestick which tells us that the sellers is rule the stocks market from the opening.
This solid black candlestick also tells us that the sellers finally rule the stocks market powerfully and push the stocks market down significantly. This black candlestick also means that the stocks market has change from indecisive (doji star) to down trend (bearish). These candlestick patterns are the strong bearish/sell signal so we mustn’t wait for technical analysis confirmation to start sell our stocks. However, for more certainty, it is always good to wait for the technical analysis confirmations before decide.
The confirmations can be from the candlestick itself or from other Technical Indicators (TA) Indicators such as Bollinger Band, Volume, Stochastic, etc. Since this article is about candlestick, 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 which has lower closing price than the first day’s opening price. Please note that this black candlestick mustn’t in the next day but may be also in several future days after the third day. This technical analysis confirmation tells us that the buyers have completely ruled the market with power that even greater than the buyers power in the first day. It is surely a time to sell the stocks.
Technical Analysis of Bearish Evening Star Candlestick Patterns
Bearish Evening Star is the three candlestick patterns which is needed three candlesticks to form the chart pattern. Bearish Evening Star Candlestick Patterns consists of a solid white candlestick, a short black/white candlestick and a solid black candlestick. Please be noted that this chart pattern is called as Bearish/Sell signal if shown after a long up trend (bearish). For more understanding, let’s take a look below picture:
From picture above, we can see that after a long/significant up trend (bullish), there is a solid white candlestick which followed by a short white/black candlestick with a gap up and then a solid black candlestick. This chart pattern is called as the Bearish Evening Star Candlestick Patterns which acts as strong bearish/buy signal. This chart pattern can be happened in various trading range time but for simplicity, let’s assume it is happened in daily basis.
In first day, there is a long solid candlestick which tells us that the buyers still rule the stocks market in full power and it is considered as continuous up trend (bullish). However, unfortunately, there is a short body candlestick (don’t care if it is white or black) with a gap up. This second day candlestick tells us that the buyers still try to push the stocks market up (which shown by the gap up) but it seems the buyers do not have enough power anymore nor the sellers finally have enough power to strike back.
This second day candlestick warn us that there is a potential for the bearish (down trend) reversal. And then, the bearish potential is happened in the third day which shown by a long solid black candlestick which tells us that the sellers finally rule the stocks market powerfully and push it down significantly. Indeed, this third black candlestick is already enough to tell us to sell our stocks. However, as usual, we need to wait for technical analysis confirmations for more certainty.
The confirmations can be from the candlestick itself or other Technical Analysis (TA) Indicators such as Volume, MACD, Accumulative/Distribution, etc. As mentioned before, this article is about candlestick so we use the candlestick based confirmation as below:
I have added a solid black candlestick and a technical analysis confirmation line in the picture above, As we can see, the 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 first day. Please be notified that this confirmed black candlestick mustn’t be happened right after the third day but may in various trading range. This technical analysis confirmation tells us that finally the sellers has stronger power than the buyers in the first day. In here, the technical analysis of Bearish Evening Star Candlestick Patterns tells us to sell the stocks.
Having a profitable stocks trading everyone!