High Profit Japanese Candlestick Continuation Patterns - How to Nauk These Patterns Like Clockwork by Mark Deaton

 

The top and bottom of a trend are often difficult to predict accurately until the patterns within the chart become more concrete. It is fairly easy to find out where the support and resistance lines lie; but it is frequently unclear whether these tests will actually break a current trend. You simply won't know for certain until the line is crossed. However, Japanese candlestick continuation patterns do offer strong clues as to what is about to occur as those support and resistance points draw near.

The differences between continuation and reversal patterns can be subtle. Learn these distinctions well so you don't jump to a conclusion based on ignorance or misidentification.

Bearish Japanese Candlestick Continuation Patterns

Falling Three Methods - This is simply a short interruption in a bearish trend. 5 candles make up this continuation pattern. The 1st day is a long black candle. The 2nd is a white candle that opens with a slight gap down. The gap is filled but the trading continues upward to close within the lower range of the 1st day. The 3rd day can be of either color but must trade within the range of the 1st day. The 4th day is a white candle that also trades within the range of the 1st day but usually slightly higher than the 2nd and 3rd days. Day 5 is a long black candle that closes below the 1st and 2nd day, clearly resuming the downtrend.

Bearish Tasuki Gap - A 3 day trading gap candle formation creates a strong continuation signal. The first 2 days are black candles that create a significant gap between them in trading. The 3rd day is a white candle that fails to fill in that gap and the day closes within it.

Three Line Strike - In a downtrend, a Three Black Crows pattern forms. The 4th day opens below the close of the 3rd day. It demonstrates a powerful move upward on a single day that closes above the opening of the 1st day. Because the 4th day's white candle is so large (barring any news to justify that move) it is assumed the downtrend will continue the next day. The huge movement is caused by short covering. Other shorts will move in to start new positions at the higher price levels.

Bearish Side By Side White Lines - In a downtrend, a long black candle forms. The 2nd day is a white candle that opens with a huge gap down which fails to fill in completely. The 3rd and final day of the pattern is another white candle that basically repeats the 2nd day. The 3rd opening and close should be nearly the same as the 2nd day while the gap down remains unfilled.

Bullish Japanese Candlestick Continuation Patterns

Rising Three Methods - This is simply a short interruption in a bullish trend similar to Falling Three Methods but in the opposite direction. 5 candles make up this continuation pattern. The 1st day is a long white candle. The 2nd is a black candle that opens with a slight gap up. The gap gets filled and continues trading downward to close within the lower range of the 1st day. The 3rd day can be of either color but must trade completely within the range of the 1st day. The 4th day is a white candle that also trades within the range of the 1st day but usually a little lower than the 2nd and 3rd days. Day 5 is a long white candle that closes above the 1st and 2nd day, clearly resuming the bullish trend.

Bullish Mat Hold - This is a resting pattern for the bulls and is similar to Rising Three Methods. The only real differences are that the initial gap up between the 1st and 2nd day does not immediately get filled and the 5th day tends to rise more significantly. The bulls appear to be (comparatively) a little stronger in this pattern.

Side by Side White Lines - In a bullish trend, a white candle forms the 1st day. A gap opens between it and the next day with another white candle. The 3rd day repeats the 2nd day, with their openings at approximately the same price. The important feature is that the gap up remains unfilled (indicating significant strength after a failed attempt at reversal).

Three Line Strike - In an uptrend, a Three White Soldiers pattern forms. The 4th day opens above the close of the 3rd day and continues to trade downward in a powerful move. The 4th day closes below the opening of the 1st day. Because the length of 4th day's black candle is so extreme (barring any news to justify that move) this Japanese candlestick continuation pattern indicates that the uptrend will continue the next day.

 

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