Candles and
Candlestick charts

Candle-ology - Sharemarket candles and candlestick charts.
How to interpret candlestick price charts and patterns
and why this is useful.

You are here: Share Market Toolbox > Candles introduction.
Related links: Candlestick Basics; Candles or bars?
Related links for Toolbox Members: Candlesticks; Candle features and psychology
 Single Candle shapes;  Patterns in UP trendsPatterns in DOWN trends.

Sharemarket candlestick price charts

Sample candlestick chart.The humble candlestick chart can tell us a lot about the health, mood and sentiment of the market.

See Candlestick basics - The basics of how to interpret candlesticks (for relative novices).

The sample candlestick chart at right is a simple short-term Daily chart of BHP over a 6-day period in August 2008.

Each candle on this chart summarises the price action in the trading of BHP in each day.

Knowing how to read these simple candles can be so very useful in gauging the mood and sentiment of the market. Candles tell us a whole lot more about the market than the simple line chart can tell us. They can help to identify likely turning points in a stock or in the market index.

See Candlestick basics - The basics of how to interpret candlesticks (for relative novices).
What about bar charts? - See the discussion Candles or bars?
New ideas

Candle Pattern Spotting - How to find which pattern

Here is a new approach to make it easier for you to find your desired candlestick pattern:
  • There are many resources available that describe specific candlestick patterns - provided you already know the name of the candle pattern. 
  • The biggest challenge for anyone new to candle-spotting is to firstly recognise that one candle shape is meaningful, or that a couple of adjacent candles can be a meaningful candle pattern.
  • The graphics here in the Share Market Toolbox will help you quickly spot a pattern, identify the name of the pattern, and then find further details for the selected pattern.
  • Because the material here is laid out rather differently to most other candlestick resources, it is reserved exclusively for Toolbox Members.
STEP 1 - Individual candle features
Understand the key features to look for in individual candles (below).

STEP 2 - The Trend?
On your price chart, are you looking at one or more candles that are:
STEP 3 - Identify the pattern
From the concise list of relevant candle patterns, select the one that best fits your pattern, and note the key comments such as:
  • key pattern characteristics,
  • similarities with other patterns and why this is different, and
  • psychology behind the pattern.
See the concise list of patterns in UP trends, or
the concise list of patterns in DOWN trends.

Quick Links (public):

Candlestick basics - The basics of how to interpret candlesticks
and candlestick charts (for relative novices).

Quick Links (for Toolbox Members):

Single candlestick patterns.

Single Candles

  • White, Black, Big, small
  • Marubozu
  • Doji
  • Spinning Top
  • Hanging Man
  • Hammer
  • Shooting Star
  • Belt Hold
See single candle shape details in the Toolbox here, including the same diagram with pattern names included.

Also see a description of the psychology at play on the Candle Features page.
 
Candlestick patterns in uptrends.

Candle patterns in Up Trends

Most of these are reversal patterns, but not all:
  • Bearish Engulfing
  • Dark Cloud Cover
  • Bearish Counterattack
  • Bearish Harami
  • Bearish Kicker
  • Evening Star
  • Hanging Man
  • Three Black Crows
  • Tweezer Top
  • Tower Top
  • Rising Three Method
  • Bullish Mat Hold
Can you see similarities in the top row of 5 candle patterns in this diagram?
The black candle in each case is less bearish than the one before.
All patterns in this diagram are bearish top reversal patterns, except two.
Do you know which two and why?

Toolbox Members see UP TRENDS details and identify candle patterns here including the same diagram with pattern names included.

Also see a description of the psychology at play on the Candle Features page.

Candlestick patterns in downtrends.

Candle patterns in Down Trends

Most of these are reversal patterns, but not all:
  • Bullish Engulfing
  • Piercing
  • Bullish Counterattack
  • Bullish Harami
  • Bullish Kicker
  • Morning Star
  • Hammer
  • Inverted Hammer
  • Three White Soldiers
  • Tweezer Bottom
  • Tower Bottom
  • Falling Three Method
  • Bearish Mat Hold
Can you see similarities in the top row of 5 candle patterns in this diagram?
The white candle in each case is less bullish than the one before.
All patterns in this diagram are bullish bottom reversal patterns, except two.
Do you know which two and why?

Toolbox Members see DOWN TRENDS details and identify candle patterns here, including the same diagram with pattern names included, and some real Aussie stock/index samples of the same.

Also see a description of the psychology at play on the Candle Features page.


More information

There are some free eBook (PDF) Articles on candles listed here. Other Articles are in the Toolbox.


Useful Links

The following web sites have lots of free information about candlestick charts and patterns.

History and more at Wikipedia

Bulkowski's Candlestick Patterns 

My SMP (Stock Market Power)

Master the Markets - Japanese Candlesticks


Features

Sensible Investing - Ask yourself if the advice you receive seems sensible.

Funda-Technical Analysis - A clever blend of Fundamental Analysis to identify quality stocks for a watch list, and Technical Analysis to time the purchase (and sale) of the stocks to minimise losses and maximise profit and capital.

Contrarian Investing Redefined - The old thinking about contrarian investing now ought to be challenged, and somewhat clarified or redefined.


Take care in the markets.

Whatever you do,
beware of the sharks
in the ocean!

Beware the sharks in the ocean.






The information presented herein represents the opinions of the web page content owner, and
are not recommendations or endorsements of any product, method, strategy, etc.
For financial advice, a professional and licensed financial advisor should be engaged.

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Copyright 2010-2012, R.B.Brain - Consulting (ABN: 52 791 744 975).
Last revised: 19 June, 2012.