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Questions and Answers
What is a characteristic of a Hammer candlestick pattern?
What is the main purpose of reversal patterns in technical analysis?
What is a characteristic of a Shooting Star candlestick pattern?
What is the confirmation required for an Engulfing pattern?
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What type of reversal pattern is formed when a candle completely engulfs the previous candle?
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What is the difference between a bullish and bearish Engulfing pattern?
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Study Notes
Candlestick Patterns
Hammer
- A bullish reversal pattern
- Forms when a small body is accompanied by a long lower shadow
- Indicates a potential bottom reversal
- Can be seen at the end of a downtrend or during a consolidation
- Confirmation is required through a subsequent bullish candle
Reversal Patterns
- Identify changes in market direction
- Can be classified into two types:
- Bullish reversal patterns (e.g., Hammer, Inverse Head and Shoulders)
- Bearish reversal patterns (e.g., Shooting Star, Head and Shoulders Top)
Shooting Star
- A bearish reversal pattern
- Forms when a small body is accompanied by a long upper shadow
- Indicates a potential top reversal
- Can be seen at the end of an uptrend or during a consolidation
- Confirmation is required through a subsequent bearish candle
Engulfing
- A reversal pattern that can be either bullish or bearish
- Forms when a candle completely engulfs the previous candle
- Bullish engulfing: a green candle engulfs a red candle
- Indicates a potential bottom reversal
- Bearish engulfing: a red candle engulfs a green candle
- Indicates a potential top reversal
- Confirmation is required through a subsequent candle
Candlestick Patterns
Hammer
- A bullish reversal pattern characterized by a small body and a long lower shadow.
- Indicates a potential bottom reversal, often seen at the end of a downtrend or during consolidation.
- Requires confirmation through a subsequent bullish candle to validate the reversal.
Reversal Patterns
- Identify changes in market direction, classified into two types:
- Bullish reversal patterns, which signal a potential shift from a downtrend to an uptrend.
- Bearish reversal patterns, which signal a potential shift from an uptrend to a downtrend.
Shooting Star
- A bearish reversal pattern characterized by a small body and a long upper shadow.
- Indicates a potential top reversal, often seen at the end of an uptrend or during consolidation.
- Requires confirmation through a subsequent bearish candle to validate the reversal.
Engulfing
- A reversal pattern that can be either bullish or bearish.
- Forms when a candle completely engulfs the previous candle, with two possible scenarios:
- Bullish engulfing: a green candle engulfs a red candle, indicating a potential bottom reversal.
- Bearish engulfing: a red candle engulfs a green candle, indicating a potential top reversal.
- Requires confirmation through a subsequent candle to validate the reversal.
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Description
This quiz covers candlestick patterns, focusing on reversal patterns that indicate changes in market direction. Learn about bullish and bearish reversal patterns, including the Hammer pattern.
