To The Moon

I believe there are some traders and investors who favored Candlestick charts because of the visual appeal and simple to understand nature.

This is the 1st part of a series of articles that I will be covering to show how to identify Bull market using Hammer candlestick.

Bullish Candlestick Charts

1. Hammer

2. Inverse Hammer

3. Bullish Engulfing

4. Piercing line

5. Morning star

6. Three white soldiers

7. The Bullish harami

8. The White Marubozu

9. Tweezer Bottom candlestick

10. The Three Outside Up

11. On-Neck pattern

Today I will be covering Hammer candlestick charts

History of Candlestick Charts

Candlestick history lies in the Japanese rice trading and the system has been updated and utilized throughout the years, becoming the most popular method of charting assets.

They are called candlesticks because of their rectangular shape and long lines (wicks) formed by price action during a certain time period.

Candlesticks provide clues to price action and the sentiment of the market towards an asset. So over time, patterns formed by multiple candlesticks will give traders signals that help bulls and bears make trading decisions.

How to Read a Single Candlestick

• Each candlestick represents one day’s worth of price data about a stock through four pieces of information: the opening price, the closing price, the high price, and the low price.

• The color of the central rectangle (called the real body) tells investors whether the opening price or the closing price was higher.

• A black or filled candlestick means the closing price for the period was less than the opening price; hence, it is bearish and indicates selling pressure.

• Meanwhile, a white or hollow candlestick means that the closing price was greater than the opening price. This is bullish and shows buying pressure.

• The lines at both ends of a candlestick are called shadows, and they show the entire range of price action for the day, from low to high. The upper shadow shows the stock’s highest price for the day, and the lower shadow shows the lowest price for the day.

Thing to note about Candlestick Charts

• Candlestick Charts can help us as it reveal the market psychology (the fear and greed experienced by sellers and buyers) through the various indicators, such as shape and color, but also by the many identifiable patterns that can be found in Candlestick Charts.

• But do remember that Candlestick Charts do not express the events taking place between the open and close price - only the relationship between the two prices.

• So Candlestick Charts could not tell us how volatile trading was within that single time period.

What is a Bull Market and Bear Market

When we say market is Bullish, it means that an investor believes that a stock or the overall market will go higher. (They call it bullish because, when a bull attacks it moves it horns upward)

Bearish usually means that an investor believes a stock will go down or underperform. ( When a bear attacks it waves it claws downward, which can be related to the decrease in stock price).

Series of article for Bullish Candlestick Patterns

I will be sharing a series of the bullish candlestick patterns over the next few weeks.

But first, let us understand what is a Bullish Candlestick Patterns?

Bullish Candlestick Patterns

Over a period of time, there will be groups of daily candlesticks fall into recognizable patterns with descriptive names like three white soldiers, dark cloud cover, hammer, morning star, and abandoned baby, these are just a few of the many examples.

Patterns form over a period of one to four weeks and are a source of valuable insight into a stock’s future price action.

But it is important to understand the 2 principles before we go into details of each individual bullish candlestick patterns.

Here are the 2 principles you may wish to understand.

1. Bullish reversal patterns should form within a downtrend. Otherwise, it’s not a bullish pattern, but a continuation pattern.

2. Most bullish reversal patterns require bullish confirmation. In other words, they must be followed by an upside price move which can come as a long hollow candlestick or a gap up and be accompanied by high trading volume. This confirmation should be observed within three days of the pattern.

Bullish Reversal Patterns

As mentioned in the 2 principles, the bullish reversal patterns can be further confirmed through use of other traditional technical analysis, like trend lines, momentum, oscillators, or volume indicators. This can be done to reaffirm buying pressure.

There are a great many candlestick patterns that indicate an opportunity to buy.

But I would like to focus more on the bullish candlestick patterns that give the strongest reversal signal.

What is a Hammer Bullish Signal

The hammer candlestick pattern is formed of a short body with a long lower wick, and is found at the bottom of a downward trend.

A hammer shows that although there were selling pressures during the day, ultimately a strong buying pressure drove the price back up.

The color of the body can vary, but green hammers indicate a stronger bull market than red hammers.

An example of Hammer Bullish Signal

Below is an example of the hammer bullish signal for $Elicio Therapeutics(ELTX)$

We could see a hammer being formed on 25th May and later the prices forms a bullish trend reaching up to $11 on 30th May.

Summary

The candlestick chart is only one of the method you can see if there will be a bullish signal for a particular stocks.

I personally would use it with other indicators or technical analysis

Appreciate if you could share your thoughts in the comment section whether you also use candlestick chart to identify bullish signal.

@TigerStars @Daily_Discussion  appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.