Bullish Reversal Candlestick Patterns indicate that the ongoing downtrend is going to end and it may reverse to an uptrend.
The Bullish Candlestick Pattern can be single or multiple candlestick patterns.
Before proceeding further One should note that: Bullish reversal patterns should form at the end of a downtrend otherwise it will act just like a continuation pattern. One should confirm the reversal signals gives by bullish reversal patterns with other indicators such as high trading volume.
In this blog we will be discussing 5 Powerful Bullish Candlestick Patterns:
Hammer is a bullish reversal candlestick pattern that occurs at the bottom of a downtrend.
This bullish candlestick pattern is formed when the open and low prices are almost the same. This pattern should consist of a lower shadow which is twice as long as the real body.
When identifying this pattern when should remember that the prior trend is a downtrend.
This pattern is formed when the real body is small along with a long lower shadow which shows that bears were trying to push down the prices but they were unable to do so.
A bullish candlestick should be formed after the Hammer which confirms that the bullish reversal has taken place.
Below is the daily chart of Nifty 50 in which all the above 3 points are demonstrated:
2. The Piercing Pattern:
A piercing pattern is a candlestick pattern that gives us potential bullish reversal signs and it is formed near the support levels at the end of a downtrend.
This pattern is made of two candlesticks, the first one is a bearish candlestick and the second one is a bullish candlestick.
The bearish candlestick should have a large real body and the second bullish candlestick should be below the low of the previous candlestick and should close above the middle of the real body of the first candlestick.
Investors must look at a few characteristics when they trade with this bullish candlestick pattern- piercing pattern:
- Firstly, the trend should be downtrend, as the piercing pattern is a bullish reversal pattern.
- Secondly, the length of the candlestick plays an important role in determining the force with which the reversal will take place.
- The gap down between the bearish and bullish candlesticks indicates how powerful the trend reversal will be.
- Fourthly, the bullish candlestick should close more than the midpoint of the previous bearish candlestick.
- Lastly, the bearish, as well as the bullish candlestick, should have larger bodies.
Below is an example of the piercing pattern in the daily chart of Sunpharma Industries Ltd.
3. Bullish Engulfing:
The bullish engulfing candlestick pattern indicates bullish reversal which shows a rise in the buying pressure. This bullish candlestick pattern indicates a reversal from downtrend as more buyers enter the market and move the prices up after a long downtrend,
The pattern consists of two candles with the second green candle completely engulfing the ‘body of the previous red candle.
One should remember when trading with a Bullish engulfing pattern the prior trend should be a downtrend. Engulfing candles helps the traders in spotting the trend reversals that indicate trend continuation, and also assist traders with an exit signal:
Engulfing patterns support the continuation of the ongoing trend, for example, when spotting a bullish engulfing pattern in an uptrend, it indicates that the ongoing trend will continue.
4. The Morning Star:
The Morning Star is a triple bullish candlestick pattern that indicates a bullish reversal.
As it is formed at the end of a downtrend it gives us a warning sign that the downtrend is going to reverse to an uptrend.
It consists of three candles; a bearish candlestick, the second one can be either bullish or bearish with a small body, and the third candlestick is a bullish candle.
One should remember when trading with the Morning Star pattern the prior trend should be a downtrend.
For confirming the reversal signals given by this pattern traders can use other technical indicators as we have to use the Relative Strength Index in our below example.
5. The Three White Soldiers:
The three white soldiers pattern is a bullish candlestick pattern occurring at the end of a downtrend and indicating a bullish reversal.
This pattern consists of three long bullish candlesticks which are green in colour and do not have long shadows.
This bullish candlestick pattern signals uptrend reversal because of the strong buying pressure by the buyers.
All the three candlesticks and open within the real body of the previous candle in the pattern.
Below is an example of a daily chart of USD/INR that shows us how Three Soldiers Candlesticks is formed after a downtrend:
How to filter our stocks using Bullish Candlestick Scans in StockEdge?
There are bullish reversal candlestick scans available in StockEdge that help us to filter the stocks as shown below-
The above discussed bullish candlestick patterns can give us important signals when the trend is going to reverse from downtrend to uptrend. One should also note that all these bullish candlesticks should be used with other technical indicators to confirm the signal given by them
- Hammer is a bullish candlestick pattern that is formed when the open and close prices are almost the same.
- A piercing pattern is a candlestick pattern that gives us potential bullish reversal signs and it is formed near the support levels at the end of a downtrend.
- The bullish engulfing candlestick pattern indicates bullish reversal which shows a rise in the buying pressure.
- The morning starconsists of three candles; a bearish candlestick, the second one can be either bullish or bearish with a small body, and the third candlestick is a bullish candle.
- The three white soldiers pattern is a bullish candlestick pattern occurring at the end of a downtrend and indicating a bullish reversal.
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