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Bearish Candle Patterns
Bearish A-D
Abandoned baby
Pattern: Reversal
Strength: Strong
The Pattern: A long white candle is followed by a Doji that is gapping in the direction of the bullish trend. Then we see a black candle gapping in the opposite direction, as long as the shadows of the Doji and the black candle do not cross the pattern is good.
The Psychology: This pattern definitely shows a possible rally as the bulls (traders with a bullish outlook) have become tired. This does not mean that the next candle will be bearish, but it means the bulls can't take it any higher. The pattern is confirmed by the next bearish candle.
If you are lucky enough to see one of these rare patterns you should consider entering.
Advanced Block
Pattern: Reversal
Strength: Medium
The Pattern: Three white days occur. Each successive day opens within the body of the previous day and closes above the previous day. The bodies of the candles get progressively smaller with the upper shadows of day 2 and 3 getting progressively longer.
The Psychology: Each successive candle is smaller and closes further from its intraday high. This isn't necessarily extremely bearish, but it's certainly less bullish. It hints that the bounce is losing steam because each attempt to rally intraday fails by a greater degree.
Belt Hold
Pattern: Reversal
Strength: Weak
The Pattern: A black candle forms with no shadow above it and closes next to the day's low.
The Psychology: The Belt Hold occurs fairly often and is not very reliable. The day's opening price holds as the high of the day and the pair trends down this means there are a lot of bears in the market. A confirmation candle is needed before entering a position.
Breakaway
Pattern: Reversal
Strength: Medium
The Pattern: A long white candle is followed by a white candle that gaps above the first. The next two candles continue in the same direction closing higher than the previous candles close. The final candle is a long bearish one that closes in the gap between the first and second candle.
The Psychology: In an uptrend the long black candles suggest a reversal. We can see the bulls getting tired as the bullish candles get smaller and smaller. There is a good chance the market will continue the bearish move at this point.
Deliberation
Pattern: Reversal
Strength: Medium
The Pattern: A long white candle is followed by another long with candle that closes higher. The next candle gaps higher and closes as either a spinning top or a Doji.
The Psychology: The spinning top/Doji at the top suggests that the bears are running out of strength. Wait for a bearish confirmation to enter.
Dark Cloud Cover
Pattern: Reversal
Strength: Strong
The Pattern: A long white candle is followed by a bearish candle that gaps above the high of the white candle and then closes below the midpoint.
The Psychology: Bears have flooded the market; this indicates a big sell off with not much reaction from the bulls. It is a strong reversal sign.
Dragonfly Doji
Pattern: Reversal
Strength: Medium
The Pattern: A Doji with little or no top wick forms inside the range of the previous candle. The longer the bottom shadow, the bigger the chance for a bearish turnaround.
The Psychology: This is not a bearish signal until we see a bullish confirmation candle. It does, however, suggest that the bulls are tired.
Downside Gap Three Methods
Pattern: Continuation
Strength: Medium
The Pattern: A long bearish candle is followed by a second gaping long bearish candle. The third candle is bullish and fills the gap between the first two candles.
The Psychology: This is attributed to profit taking and as long as it remains below the open of the first day the bearish trend is still active.
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