Bottom Reversals

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    Bottom Reversals

    The following rules are applicable for a bottom reversal:

    A bottom reversal is only possible AFTERa downtrend.

    Most of the patterns need a confirmation. A confirmation must appear one up to three candles after the pattern.

    This confirmation is a big white candle, high volume with the new up-move, a

    rising window, or breaking a resistance.

    A reversal pattern during price reaction must be considered a continuation pattern.

    For the best result, you must combine candlestick patterns with Western technical

    analysis. An unconfirmed pattern has no further meaning.

    Engulfing Bullish

    In a downtrend, there is a small black body, not adoji, followed and enclosed by a bigger white body.Though not necessary, it is better when the white

    body also encloses the short shadows of the black

    candle.

    An exceptional occurrence at the end of a downtrendis a white body followed by a bigger black body; this

    is called a last engulfing pattern.

    Piercing Line

    In a downtrend, a bigger black body is followed by a

    white body with a lower opening price than the low of

    the black body; however, the white candle closesabove the midpoint of the black body.

    Bullish Counterattack

    A bullish counterattack is a bigger black candle in adowntrend, followed by a bigger white candle.

    Closing prices of both candles are at the same price

    level.Confirmation is needed.

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    Bullish Harami

    In a downtrend, a white (but preferably a black) body

    is followed by a small white or black candle that iscompletely covered by the first candle body.

    A bottom reversal signal after confirmation. Black-

    white and black-black (called homing pigeon)combinations are the most common.

    Bullish Harami Cross

    In a downtrend, a white (but preferably a black) body

    is followed by a doji that is completely covered by the

    first candle body.

    A bullish harami cross pattern needs confirmation.

    Morning Star

    A bigger black body, followed by one or more small black

    or white bodies below the closing price of the first black

    body. The white candle that follows ideally lays 50% or

    more within the first black body and has a rising windowwith the previous candle body.

    Morning Doji Star

    A bigger black body, followed by one or more dojis witha falling window below the closing price of the first black

    body. The white candle that follows ideally lays 50% or

    more within the first black body and has a rising window

    with the previous doji body.

    This is a stronger reversal signal than a morning star.

    Bullish Abandoned Baby

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    An abandoned baby pattern is a morning doji star with a

    window between the doji and the black and white candle,

    resulting in an island reversal. The island can have more

    candles and more than one doji.

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    Hammer

    A hammer is a small white or black body close to the high

    price. It has a long shadow below with a minimum size of

    twice the height of the body. There is a very small shadowor no shadow at the top. A dragonfly doji is a specific

    version of the hammer pattern.

    Confirmation is required. A white body is more positive.

    Inverted Hammer

    An inverted hammer is a small black ( but preferably asmall white) body near the low price. It has a long

    shadow above that is, at minimum, twice the size of the

    body. It only has a very small shadow or no shadowbelow. A gravestone doji is a specific version of the

    inverted hammer.

    A bottom reversal only after confirmation.

    Tweezer Bottoms

    Two or more candles making lows together. Preferably,

    the lows are made with low prices, but they also can be

    combinations of any of the other prices. Size and color arenot important. This is a reversal pattern that, most of the

    time, is part of another pattern.

    Fry Pan Bottom

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    The fry pan bottom is formed with a number of

    smaller candles. After this bottoming pattern, the

    price usually makes an up-move with a risingwindow.

    A fry pan bottom is a powerful reversal pattern.

    Three River Bottom

    During a downtrend, there is a bigger black candle on

    the first day of this pattern. The second day starts with

    a higher opening price; then makes a new lower lowand closes the day below the opening price. The third

    day opens lower and forms a small white body with a

    closing price below the closing price of the second

    day.A rare bottom reversal pattern; confirmation is

    required.

    Three White Soldiers

    Three white candlesticks with each bar having higherclosing prices, close to the high of the bar. Opening

    prices of candles two and three are within the body of

    the previous candles.

    Many times, there will be a small reaction before thenew uptrend is resumed.