Candlestick patterns are the building blocks of chart reading. Each pattern tells a story about the battle between buyers and sellers during a specific time period. This cheat sheet covers the essential patterns every trader should recognize.
Bullish Reversal Patterns
Hammer A single candle with a small body at the top and a long lower wick (at least 2x the body). Appears after a downtrend. The long wick shows sellers pushed price down but buyers fought back and closed near the high. Strongest when followed by a green confirmation candle.
Bullish Engulfing A large green candle that completely engulfs the previous red candle's body. Shows a decisive shift from selling to buying pressure. More significant when appearing at support levels or after extended downtrends.
Morning Star A three-candle pattern: large red candle, small-bodied candle (the star), then a large green candle closing above the midpoint of the first candle. Represents a transition from bearish to bullish sentiment. The gap between the star and surrounding candles adds reliability.
Piercing Line A green candle that opens below the previous red candle's low but closes above its midpoint. Buyers stepped in after an initial gap down and reclaimed significant ground.
Bearish Reversal Patterns
Shooting Star The opposite of a hammer — small body at the bottom with a long upper wick. Appears after an uptrend. Buyers pushed price higher but sellers took control and closed near the low.
Bearish Engulfing A large red candle engulfing the previous green candle's body. Signals that sellers have overwhelmed buyers. Most significant at resistance levels.
Evening Star Three-candle pattern: large green candle, small-bodied star, then a large red candle. The mirror of the morning star. Signals a top and potential reversal.
Dark Cloud Cover A red candle that opens above the previous green candle's high but closes below its midpoint. Sellers responded aggressively to new highs.
Continuation Patterns
Doji Open and close are virtually the same, creating a cross or plus shape. Represents indecision. In isolation a doji is neutral — context determines its significance. After a strong trend, a doji can signal exhaustion.
Three White Soldiers Three consecutive green candles with higher closes, each opening within the previous candle's body. Strong bullish continuation signal showing sustained buying pressure.
Three Black Crows Three consecutive red candles with lower closes. Bearish continuation showing persistent selling pressure. Watch for this after failed rallies to resistance.
How to Use This Cheat Sheet
1. **Context matters most** — a hammer at a major support level is far more significant than one in the middle of nowhere 2. **Wait for confirmation** — a single candle is a clue, not a verdict. Wait for the next candle to confirm 3. **Volume validates** — patterns accompanied by above-average volume are more reliable 4. **Timeframe affects significance** — daily candlestick patterns carry more weight than 5-minute patterns
Practice spotting these patterns on real charts. Wyck's AI identifies candlestick formations automatically on any chart screenshot, so you can check your analysis against the AI's reading.
*This content is for educational purposes only and does not constitute financial advice. Past patterns do not guarantee future results.*