Technical Analysis: Candlestick Charts and Their Interpretation

Technical Analysis: Candlestick Charts and Their Interpretation…

Technical Analysis of Candlestick Charts

Each candlestick chart shows price movement over time intervals such as 1 second, 1 minute, 5 minutes, 30 minutes, 1 hour, 4 hours, 1 day, 1 week, 1 month and so on.

In green candlestick charts, the lower edge of the rectangular bar is the opening price and the upper edge is the closing price. In red candles, the situation is the opposite, that is, the upper edge of the rectangle bar is the opening price and the lower edge is the closing price. The lines in the form of needles show the levels that the price reached but not stay there within the time interval expressed by the candle chart.

Candlestick Charts Showing That the Price Will Increase

Long Green Candlestick

If a “Long Green Candlestick” occurs after prices have fallen to a certain bottom point and the closing price of the candle approaches a recent peak, we can think that the price increase will be continuous.

Hammer Situation and Hanged Man Situation

“Hanging Man Candlestick Pattern” when prices are at the tops, “Hammer Candlestick Pattern” when prices are at the bottoms. Hammer Situation meaning: Prices have tested the bottom, it is difficult to fall further.

Piercing Line Candlestick Pattern

It is the exact opposite of “Dark Cloud Pattern”. Prices open lower and go past the half of red candle and close.

Engulfing Candlestick Pattern

If “Engulfing Green Candle” occurs after a downtrend, it gives a very serious bullish signal. If it is on the rise, it means that the rise will continue, although not as much as the first times.

Morning Star Candlestick Pattern

The candle in the middle may also be red. The formation of this view after a certain decline gives a serious upward signal. The important thing here is that the subsequent long green candlestick closes well above the middle level of the red candlestick.

Bullish Doji Star Candlestick Pattern

Doji star indicates an indecision. If it occurs after a certain decline, it indicates an increase. But after seeing the Doji star, it is necessary to wait at least one or two candles duration. It is risky to act directly according to this star.

Candlestick Charts Showing That the Price Will Decrease

Long Red Candlestick

If a “Long Red Candlestick” appears that breaks an important support point and the transaction volume has increased very much at that moment, an escape from that investment instrument has begun. In such a situation, the most logical thing is to sell even if you are at a loss. Because it is very likely that the decline will continue.

Hanging Man Candlestick Pattern

If we see this chart pattern in an uptrend, the price will most likely fall. One of the two candles may be slightly lower or higher.

Dark Cloud Candlestick Pattern

It usually occurs when there is a price peak. The red candle opens at or above the closing of the previous green candle and closes below half the level of the green candle. If the transaction volume has increased compared to the previous chart when this chart occur, this increases the possibility of a decline even more.

Engulfing Red Candle Pattern

It gives a decline signal, but it is useful to be careful just in case.

Evening Star Candlestick Pattern

The candle in the middle may also be red. Usually this appearance occurs after a certain uptrend. If the red candle falls to a level below half of the first long green candle, the possibility of prices falling increases.

Bearish Doji Star Candlestick Pattern

This situation indicates an indecision. Trading at this point is risky. It should be waited for one or two candlesticks duration. If, with the increase in transaction volume, a red candle appears that will break down that level of half of green candle, we need to sell. Because this indicates a price decline.

Falling Star Candlestick Pattern

This falling star, whose upper part is at least twice as long as its body, can signal that prices will fall if it comes after a long green candle. Especially if the investment instrument has peaked after a long time and this appearance has been formed, the possibility of decline becomes stronger.

Long Legged Doji Star Candlestick Pattern

If this graph is formed after prices have risen for a certain period of time, it means that the first signal that the decline will begin has been received. However, if this graph occurs after a certain decline, price may also make an upward turning point. But in this case, it would be healthier for the investment to wait for one or two more candles duration.

Dragonfly Doji Candlestick Pattern

If it occurred after a significant rise, the price will most likely fall. If such a graph occurs after the prices have fallen, it can be interpreted that the decline has stopped or even prices started to rise. The difference between this and the Doji star is that it opens and closes at a higher level.

Gravestone Doji Candlestick Pattern

This pattern is usually seen after prices have risen sharply and unquestionably indicates that the decline will begin. If there were even a little green candle on the chart, we could think positively. But if it happens this way, a decline is almost guaranteed.

NOTE: It is not right to make a decision by looking at a single candlestick chart. Thoughts should be clarified with Transaction Volume, Support-Resistance Lines, Indicators and Formations.

Next chapter: Technical Analysis: Trends, Support-Resistance Points

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