Bullish Japanese Candlestick
Japanese candlestick can be a great help to us. Just like chart patterns, there are also patterns in candlesticks. These patterns will show us possible reversal and continuation in stocks.
It is said that there is a time for everything under the sun. Similarly, in investing or trading, there is a time to buy, time to sell and a time to do nothing at all.
Every day, we are faced with the decision of whether to enter, exit or remain in a stock. Here, you will learn some bullish japanese candlestick continuation patterns.
Rising Three Methods
The rising three method consists of 5 candles. The first day is a long green bar representing a big move upwards. However, for the next 3 days, we see the stock going down. These down moves are formed with three smaller bodies.
At least two of these small bodies are red in color. During these periods, the stock appears to go nowhere. It is considered a period of rest. Also, remember, small bodies signifies that momentum is not strong and is slowing down. When the stock goes down for a few days in an uptrend, it is good to see it go down with a slowing momentum.
On the fifth day, the stock shoots up in price forming a long green bar. The presence of the long green bar signifies that prices have broken out of the short trading range. Thus, the stock will continue its uptrend.
If you are holding on to the stock, the formation of this pattern can give you great reassurance. Some traders will enter on the fifth day when the stock goes above the high of the fourth day.
Traders will look for other clues on how to play this pattern. For example, if the fourth day's price closes near a support or it forms a hammer, then traders will look to enter on the fifth day.
Bullish Mat Hold
The bullish mat hold is quite similar to the rising three method. This japanese candlestick pattern also has 5 candles. The difference is the second, third and fourth bars are higher than those in the rising three methods.
The first is a long green bar. On the second day, the stock gaps up. It forms a narrow body and closes slightly lower. Although it closed lower for that day, it is still a new closing high for the uptrending stock.
The stock starts to move lower on the third and fourth day. However, it moves lower by forming small bodies. The third day's candle dips slightly into the body of the first large green bar. This is followed by the fourth day's candle which dips a bit more into the body of the first large green bar.
On the last day, the stock gaps up and continues moving up forming a long green bar. This bar closes above the trading ranges of the previous four days.
This pattern is stronger than the rising three method. The second, third and fourth bar stays close to the upper range of the first large green bar.
The bears tried to push the price of the stock down for those three days. However, the stock refuses to go down much. This signals strength in the stock. The stock is not going down but is only resting. On the fifth day, the stock shoots up and closes at a new high. The bulls are now in total control. The stock is likely to continue the uptrend.
Separating Line Bullish
This japanese candlestick pattern is formed in an uptrend. After the stock has moved up, a long red candle appears. When a bearish candles appears in the uptrend it causes some concerns among the bulls.
However, on the next day, the stock gaps up and opens near the opening of yesterday's candle. The stock opens at its low and continues to move up throughout the rest of the day, closing near the highs.
During an uptrend, it can be scary to see a long red candle. This causes some concern among the bulls as to whether the trend will continue or not. On the day where the long red candle formed, those who bought the stock at the opening are in a losing position. Everybody fears that the bears may be gaining control.
The fact that the stock gapped up the next day and continued to move up shows that the bears have lost control. The bulls are winning and there is a great possibility that the uptrend will continue. It is good to look for a confirmation on the third day. It could either be another bullish candle, a gap up or a higher close the next day.
Upside gap three method
This japanese candlestick pattern appears in an uptrend. During the uptrend, two green candle bars are formed. The second green candle gaps up above the first green candle. On the third day, a red candle forms. This red candle closes the gap between the two green candles.
When the first two green bars are formed, the stock is in a very bullish mood. This is because the stock gapped up. However, gaps are usually filled. On the third day, the stock closes the gap forming a red candle bar.
The fact that it closes the gap almost immediately, suggests that the downward move is only profit taking and not a selling of the stock. Once the gap filling is satisfied, the uptrend should continue.
Gaps are also regarded as excellent support and resistance areas. Thus, it is good to wait for confirmation on the fourth day. This can either be another gap up, a green candle bar or a higher close. Once you see that, the uptrend is more likely to continue.
Upside Tasuki Gap
This japanese candlestick pattern is quite similar to the upside gap three method. The difference is, the gap between the first two bars is not filled on the third day.
When a gap appears in an uptrend and is not filled on weakness during the third day, it shows us that there is still strength in the uptrend. The slight downward move on the third day is regarded as only profit taking. Thus, the uptrend should continue.
Again, as with most japanese candlestick patterns, it is good to wait for a confirmation on the next day. This confirmation could be either another gap up, a green candle bar or a higher close.
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