Strong Bullish Reversal Patterns | A Forex Trading and Techniques Blog

Bullish Three Outside Up Candlestick Pattern

May 29, 2010 By Raj Leave a Comment

Bullish Three Outside Up Pattern:

Bullish Three Outside Up Candlestick Pattern

Type : Reversal
Direction : Bullish
Prior Trend : Bearish
Reliability : High

Bullish three outside up candlestick pattern is a bullish reverse pattern. It consists of a bullish engulfing candlestick pattern followed by another bullish candlestick.

How to recognize three outside up patterns:

1) The market is in a downtrend.
2) A bullish engulfing candlestick structure forms at the bottom of the trend.
3) After the bullish engulfing candlestick structure a bullish candlestick forms.

Importand Factors:
Use some other indicators to confirm the reversal.

Some examples of the three outside up candlestick reversal patterns:

The following are some of the real time examples of a three outside up candlestick pattern for different currency pairs

EURUSD Hourly Chart:

EURUSD Hourly Chart Three Outside Up Pattern

GBPCAD Hourly Chart:

GBPCAD Hourly Chart Three Outside Up Pattern

USDCAD Hourly Chart:

USDCAD Hourly Chart Three Outside Up Pattern

AUDCAD Hourly Chart:

AUDCAD Hourly Chart Three Outside Up Pattern

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Three Inside Up Candlestick Pattern

May 29, 2010 By Raj Leave a Comment

Bullish Three Inside Up:

Three Inside Up Candlestick Pattern

Type : Reversal
Direction : Bullish
Prior Trend : Bearish
Reliability : High

Bullish three inside up pattern is a bullish reversal pattern. It consists of a long bearish candlestick followed by two bullish candlesticks with the first one coming until the middle of the bearish candlestick and the second one closing above the bearish candlestick.

How to recognize three inside up patterns:

1) The market is in a downtrend.
2) A long bearish candlestick forms in the downtrend.
3) After the bearish candlestick a bullish candlestick forms penetraing until the middle of the bearish candlestick.
4) After the bullish candlestick another bullish candlestick forms closing above the bearish candlestick.

Important factors:

1) Alwyas make sure that the second bullish candlestick closes above the bearish candlestick.
2) Use another indicator like CCI to confirm the reversal.

Some examples of the three inside up candlestick reversal patterns:

The following are some examples of the three inside up candlestick reversal patterns for different currency pairs.

EURUSD Hourly Chart:

EURUSD Hourly Chart Three Inside Up Pattern

GBPCAD Hourly Chart:

GBPCAD Hourly Chart Three Inside Up Pattern

GBPJPY Hourly Chart:

GBPJPY Hourly Chart Three Inside Up Pattern

GBPUSD Hourly Chart:

GBPUSD Hourly Chart Three Inside Up Pattern

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Filed Under: Strong Bullish Reversal Patterns Tagged With: Bullish Reversal Patterns, candlestick patterns, forex candlestick trading, strong bullish candlestick patterns, three inside up pattern

Three White Soldiers Candlesticks Pattern

May 29, 2010 By Raj Leave a Comment

Three White Soldiers:

Three White Soldiers

Type : Reversal
Direction : Bullish
Prior Trend : Bearish
Reliability : High

Three white soldiers is a very highly reliable bullish reversal candlestick pattern. It consists of three long bullish candlesticks formed in a downtrend after a bearish candlestick.

How to recognize three white soldiers pattern:

1) The market is in a downtrend.

2) Three long bullish candlesticks forms in the downtrend.

3) Each bullish candlestick closes above the previous candlestick.

Important factors:

1) Do not use this pattern for entry in Asian market session if there is a strong downtrend. Because once the London market session starts the price will reverse and may follow the downtrend.

2) When you are entering the trade make sure that the price is not in the overbought region.

3) When the price is in a strong downtrend and you entered a long trade after seeing three white soldiers make sure you move your stop loss above the entry after you got some profit. Also if any evening doji star or a bearish engulfing candlestick is formed try to exit the trade as it may be an indication of the continuation of the downtrend.

Some of the real time examples of three white soldiers for different currency pairs:

EURUSD Hourly Chart:

EURUSD Hourly Chart Three White Soldiers

GBPJPY Hourly Chart:

GBPJPY Hourly Chart Three White Soldiers

GBPUSD Hourly Chart:

GBPUSD Hourly Chart Three White Soldiers

USDCHF Hourly Chart:

USDCHF Hourly Chart Three White Soldiers

EURJPY Four Hour Chart:

EURJPY Four Hour Chart Three White Soldiers

GBPAUD Four Hour Chart:

GBPAUD Four Hour Chart Three White Soldiers

GBPNZD Four Hour Chart:

GBPNZD Four Hour Chart Three White Soldiers

USDCAD Four Hour Chart:

USDCAD Four Hour Chart Three White Soldiers

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Filed Under: Strong Bullish Reversal Patterns Tagged With: bullish candlestick pattern, candlestick pattern, candlestick pattern that always works, Candlestick Trading, reliable candlestick pattern, strong candlestick pattern, three white soldiers

Bullish Engulfing Candlestick Patterns in Forex Trading

May 28, 2010 By Raj 3 Comments

Bullish Engulfing Candlesticks:

Bullish Engulfing Candlestick Patterns

Type : Reversal
Direction : Bullish
Prior Trend : Bearish
Reliability : High

Generally forex traders say that bullish engulfing is a medium bullish reversal pattern but I consider this as a very strong bullish pattern when combined with other indicators like support lines or support trend lines. So I am putting it under strong bullish reversal patterns instead of medium bullish reversal patterns. A bullish candlestick pattern consists of a two candlesticks in which the first candlestick is completely occupied by the second candlestick.

How to recognize bullish engulfing candlestick pattern:

1) The market is in a downtrend.
2) A strong bearish candlestick forms.
3) After the bearish candlestick, a bullish candlestick forms with the opening price same as the closing price of the bearish candlestick or below the closing price of the bearish candlestick.
4) The bullish candlestick closes above the bearish candlestick.

Generally a bullish engulfing pattern should have the bullish candlestick opening price below the close price of the bearish candlestick like the second one in the above picture. But I still consider the pattern as a bullish engulfing pattern even if the close price of the bearish candlestick and open price of the bullish candlestick are same like the first one in the above picture.

Important Factors:

The size of the first and second candlesticks plays an important role in the reversal of the trend. For example if the first candlestick of the bullish engulfing pattern is a very small candlestick and the second candlestick is a very long candlestick there is is a very high probability for price reversal.

Use some other indicators like trend lines, Bollinger Bands, CCI, Stochastics with bullish engulfing pattern to confirm the price reversal.

The following are some of the real time examples for different currency pairs.

EURJPY Bullish Engulfing Candlesticks:

EURJPY Bullish Engulfing Candlestick Pattern

GBPUSD Bullish Engulfing Candlestick Pattern:

GBPUSD Bullish Engulfing Candlestick Pattern

How To Trade Bullish Engulfing:

The reason I put bullish engulfing in strong bullish reversal patterns instead of medium bullish engulfing patterns, as I explained above, is they are very effective with other indicators. The following are some of the ways you can use engulfing bullish candlestick patterns with other indicators.

1) Bullish engulfing at support lines

If a bullish engulfing candlestick pattern is formed at the support line this is a very good opportunity to enter a long trade. I have taken many successful trades and they always worked very well. Check the following pictures.

GBPUSD hourly chart bullish engulfing candlestick pattern at support line:

The following is the GBPUSD hourly chart. You can see the support line at the bottom and a bullish engulfing candlestick pattern is formed at the support line and the price bumped up.

GBPUSD Bullish Engulfing at Support Line

Another GBPUSD hourly chart bullish engulfing candlestick pattern at support line:

The following is another GBPUSD hourly chart with a support line. A bullish engulfing candlestick pattern is formed at the support line and the price reversed.

Another GBPUSD Bullish Engulfing at Support Line

GBPJPY four hour chart bullish engulfing candlestick pattern at support line:

The following is the GBPJPY four hour chart.You can see that a bullish candlestick pattern is formed at the support line and the price bumped up.

GBPJPY Four Hour Bullish Engulfing at Support Line

2) Bullish engulfing at trend lines

If at any trend line that you draw a bullish engulfing candlestick pattern is formed, it is very good opportunity to enter a long trade.

GBPUSD hourly chart bullish candlestick at support trend line:

Check the following picture. It is a GBPUSD hourly chart and you can see a support trend line. There is bullish engulfing candlestick formed at the support trend line and the price reversed.

GBPUSD Bullish Engulfing at Support Trend Line

3) Bullish engulfing in an uptrend

When the price is in an up trend there will be short reversals. If in the reversals a bullish engulfing candlesticks pattern is formed it is a very good opportunity to enter a long trade. Check the following currency pairs.

EURJPY hourly chart bullish engulfing in an uptrend:

The following is the hourly chart for EURJPY currency pair. You can see that the currency pair is in an uptrend. In the uptrend the price reversed back and a bullish engulfing pattern is formed. So this is a good opportunity to enter long trade at this point.

EURJPY Hourly Chart Bullish Engulfing in Uptrend

EURUSD hourly chart bullish engulfing in an uptrend:

The following is the hourly chart for EURUSD currency pair and the pair is in an uptrend. The price reversed back and a bullish engulfing candlestick is formed. and the priced followed the trend.

EURUSD Hourly Chart Bullish Engulfing in Uptrend

4) Bullish engulfing when resistance becomes support

Support and resistances are very common in forex trading and sometimes when the price crosses them they act in reverse. For example when price crosses a support line and the price reverses back the support line may act as a resistance line. The same way when the price crosses a resistance line and reverses back the resistance line may act as a support line. In this case if a bullish engulfing signal is formed we can enter a long trade. Check the following currency pair.

GBPCAD bullish engulfing when resistance becomes support:

The following is the GBPCAD currency pair and you can see a resistance line for this currency pair. The price crossed the resistance line and it reversed back. When it reversed back at the resistance line a bullish engulfing candlestick is formed and the resistance became a support line and the price bumped up.

GBPCAD Bullish Engulfing When Resistance Becomes Support

5) Bullish engulfing and divergence

Divergence occurs when the price forms the lower lows but MACD shows higher lows. At this point if a bullish engulfing candlestick is formed you can enter a long trade. Check the following currency pair examples.

EURUSD hourly chart MACD divergence and Bullish engulfing:

The following is the hourly chart of EURUSD and you can see that there is divergence formed. The price is showing a lower lows and the MACD showing a higher lows and a bullish engulfing candlestick pattern formed and the price reversed here.

EURUSD Hourly Chart MACD Divergence and Bullish Engulfing

GBPUSD hourly chart MACD divergence and Bullish engulfing:

The following is the hourly chart of GBPUSD and the price is showing lower lows but MACD is showing higher lows and it formed a divergence. A bullish engulfing candlestick pattern is formed at this point and the price reversed.

GBPUSD MACD Divergence and Bullish Engulfing

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Filed Under: Strong Bullish Reversal Patterns Tagged With: bullish candlesticks and trend lines, bullish candlesticks in uptrend, bullish engulfing candlesticks, candlesticks and support lines, engulfing candlesticks, engulfing pattern, forex candlestick patterns, forex candlestick trading

Morning Doji Star

May 25, 2010 By Raj Leave a Comment

Morning Doji Star

Type : Reversal
Direction : Bullish
Prior Trend : Bearish
Reliability : High

Morning Doji Star pattern consists of three candlesticks. This is a bullish reversal pattern which occurs in a down trend. This is an highly reliable candlestick pattern if it is combined with other indicators like Bollinger Bands, CCI, Stochastics etc. This pattern consists of of a bearish candlestick in a downtrend followed by a doji followed by a bullish candlestick.

How to recognize morning doji stars:

1) The market is in a downtrend.
2) A bearish candlestick forms.
3) After the bearish candlestick a doji forms.
4) A bullish candlestick appears after the doji.

Important Factors:

1) It is always important to wait for the third candlestick after the doji is formed and confirm that it is a bullish candlestick.
2) As a doji means the open and close prices are same, it is very very rare that you will see a real doji formation in forex. But if the candlestick visually appears like the open and close prices are same, I consider it as a doji.
3) Morning doji stars are very powerful if they are combined with other indicators like bollinger bands, CCI or stochastics. So always use morning doji stars with other indicators to confirm the reversal.

The following are some of the real time examples of morning doji stars:

GBPCAD Hourly Chart Morning Doji Star:

GBPCAD Morning Doji Star

USDJPY Four Hour Chart Morning Doji Stars:

USDJPY Morning Doji Stars

How to trade morning doji stars:

As I mentioned above morning doji stars work very good with other indicators. The following are some of the examples of how you can use morning doji stars.

1) If the market is in a range bound market where the bollinger bands are parallel and if a morning doji star is formed at the bottom of the bollinger bands it’s a good entry for a long trade. The following is the GBPCAD hourly chart, which I have shown above but with the indicators bollinger bands, CCI and Stochastics. If you observe the maket, it is in a range bound market. If you observe the morning doji star, the doji has formed completely outside of the bollinger bands. Moreover CCI is below -100 and stochastics has touched the -20 line. After the bullish candlestick completed after the doji, the stochastics moving averages crossed each other. So it’s a good opportunity to enter a long trade.

GBPCAD Morning Doji Star Trading

2) If the market is in a trend retracements are very common. If the trend is an uptrend and if in the retracements a morning doji star is formed it’s a good opportunity to enter long trades in the direction of trend. Check the following example. The following is the USDJPY four hour chart. If you check the chart you can see that it’s in an uptrend and you can see the retracements. In the retracements the morning doji stars are formed and the market started following the trend. So these are good points to enter the trend.

USDJPY Morning Doji Stars Trading

3) Trend lines are one of the important trading techniques of many forex traders. Once a trend line is broken in many cases the price reverses back to the trend line. For example the following is the USDCAD hourly chart and I have drawn a trend line which is a resistance line. The resistance trend line is broken at some point and you can see that the price returned back to the trend line. Now the resistance trend line acted as a support trend line and a morning doji star is formed at this point and you can see that the price bumped up almost 200 pips. So when a trend line is broken the the price returned back and if a morning doji star is formed at the trend line it’s a good opportunity to enter a long trade.

USDCAD Morning Doji Star

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Filed Under: Strong Bullish Reversal Patterns Tagged With: bullish doji stars, doji trading, forex doji, forex morning doji stars, how to trade morning doji stars, morning doji star

Piercing Line Candlesticks

May 23, 2010 By Raj Leave a Comment

Piercing Candlestick Formations

Type : Reversal
Direction : Bullish
Prior Trend : Bearish
Reliability : High

Piercing Line Candlestick is a bullish reversal pattern which occurs in a down trend. This is an highly reliable candlestick pattern. After long bearish candlestick closes the price opens below the closing price of the bearish candlestick and a long bullish candlestick forms. The bullish candlestick closes below the opening price of the bearish candlestick.

How to recognize piercing line candlestick:

1) The market is in a downtrend.
2) A long bearish candlestick forms.
3) For the next candlestick the price opens below the closing price of the long bearish candlestick.
4) A long bullish candlestick appears but the price closes below the open price of the bearish candlestick forming a piercing line candlestick.

Important Factors:

1) In piercing line pattern the greater the degree of the penetration of the bullish candlestick in to the bearish candlestick the greater the reversal strength. An ideal piercing line pattern should have the bullish candlestick body penetrated more than half of the bearish candlestick body.
2) Even though piercing line candlestick pattern itself is a good reversal pattern use some other indicator to confirm it like support lines, stochastic indicator etc.

The following are some of the real time examples for piercing line candlestick pattern.

USDCHF Currency Pair:

USDCHF Hourly Chart Piercing Line Candlesticks

USDCAD Currency Pair:

USDCAD Hourly Chart Piercing Line Candlestick

USDJPY Currency Pair:

USDJPY Four Hour Piercing Line Candlesticks

NZDUSD Currency Pair:

NZDUSD Daily Chart Piercing Line Candlesticks

EURJPY Currency Pair:

EURJPY Daily Chart Piercing Line Candlesticks

How to trade the piercing line pattern:

Although piercing line candlestick pattern is a very reliable strong bullish candlestick pattern always use some other indicators to enter trading. Check the following picture. This is a NZDUSD daily chart. You can see two piercing line formations. I am using four indicators here. Bollinger Bands, Trend Lines, CCI and Stochastics.

NZDUSD Piercing Line Candlesticks Trading

1) First Piercing Line Candlestick Formation
It is formed at the bottom of the bollinger bands.
There is a support line where it formed the piercing line candlestick formation.
The CCI has crossed the -100 line and it has reached around -200 which is an indication for reversal.
The stochastics crossed below 20 line and when the piercing line candlesticks formation is completed the moving average lines of the stochastics have crossed each other.

Based on all the above factors it is a good entry.

2) Second Piercing Line Candlestick Formations
The piercing line candlestick formation is formed but not in a downtrend. If you observer the candlesticks they are in a range market.
CCI is not below the -100 line.
Stochastics is not below 20 line.

Based on the above factors it is not a good entry.

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Filed Under: Strong Bullish Reversal Patterns Tagged With: bullish piercing candlesticks, forex piercing candlesticks, forex reversals, how to trade piercing candlesticks, Piercing Line Candlesticks

Bullish Three Outside Up Candlestick Pattern

Three Inside Up Candlestick Pattern

Three White Soldiers Candlesticks Pattern

Bullish Engulfing Candlestick Patterns in Forex Trading

Morning Doji Star

Piercing Line Candlesticks

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