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💹 Series 8: Mastering Technical Analysis

Day 4: Candlestick Patterns That Reveal Market Psychology

When I first learned technical analysis, I used to stare at candlestick charts and wonder, “Why do they look so complicated?”
Green bars, red bars, long wicks, short wicks — everything looked random.
But over time, I realised something powerful.
Candlesticks are not random at all… they are stories.

Each candlestick shows a battle between buyers and sellers.
It shows fear, confidence, hesitation, greed, panic, and hope — all packed into one tiny shape.
Once I understood how to read these stories, the market became much easier to understand.
Today, I want to help you unlock the same skill.

And don’t worry — I’ll explain everything simply, in a way even a 12-year-old can grasp.
By the end of this, you’ll be able to look at a chart and instantly know what’s happening beneath the surface.
You’ll be able to spot trend reversals, strong buying pressure, and early warning signs.
Let’s dive into the psychology behind candlestick patterns.

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🔥 Why Candlestick Patterns Matter

Price moves because people buy and sell.
Candlestick patterns show you how people are behaving at any moment.
You’re not just looking at shapes — you’re reading emotions.
You’re interpreting crowd psychology.

Here’s why candlestick patterns matter:

• They show you where buyers are getting stronger

• They reveal where sellers are losing control

• They help you predict possible trend reversals

• They give you confidence to enter and exit at better prices

• They reduce emotional decisions

Understanding these patterns is like learning body language.
Someone may say they are fine… but their body tells another story.
The market is the same.

🟩 Understanding the Basics First

Before we get into patterns, you need to know what a candlestick tells you.

Every candlestick shows four important prices:

• Open (where the price started)

• High (the highest price reached)

• Low (the lowest price reached)

• Close (where the price ended)

If the candle is green, price closed higher than it opened.
If it’s red, price closed lower.

The “body” is the thick part.
The “wicks” or “shadows” are the long thin lines above and below.
These wicks show rejection, fear, and aggression.

Wicks tell the real story.

🌟 Pattern 1: The Hammer — A Strong Reversal Signal

The Hammer is one of my favourite candlestick patterns.
It appears after a downtrend and looks like a tiny body sitting on top of a long lower wick.
It literally looks like a hammer pointing downwards.
And it shows that buyers just punched back.

Here’s what happened during a Hammer:

• Sellers pushed the price down hard

• Buyers came in aggressively

• Buyers pushed the price back up before the candle closed

• The long lower wick shows rejection of lower prices

In simple words:
Buyers refused to let the price fall further.

When I see a Hammer after a long drop, I pay attention.
It shows buyers are stepping in.

🌑 Pattern 2: Inverted Hammer — Strength After Weakness

The Inverted Hammer also appears after a downtrend.
This time it looks like a small body at the bottom, with a long upper wick.
The buyers tried to push price up strongly, but sellers forced it back down.
Still, buyers showed strength.

This pattern tells me:

• Buyers are beginning to enter

• Sellers may be losing pressure

• Trend could be preparing to reverse

It’s a warning sign for sellers and a hopeful sign for buyers.

🟥 Pattern 3: Shooting Star — Trouble at the Top

The Shooting Star is the cousin of the Inverted Hammer, but it appears at the top of an uptrend.
It looks like a small body with a long upper wick.
Sellers took control near the end of the candle.
This shows strong rejection of higher prices.

Here’s the psychology:

• Buyers pushed price up

• Sellers smashed it back down

• The uptrend may be weakening

Whenever I see a Shooting Star near resistance, I become cautious.
It often signals a potential trend reversal downward.

🟥 Pattern 4: Bearish Engulfing — A Sudden Shift in Power

This is a powerful reversal pattern that appears at the top of an uptrend.
A small green candle is followed by a large red candle that completely engulfs the first one.
This tells you the sellers crushed the buyers.
The shift in power is very clear.

Psychology behind it:

• Buyers were in control

• Sellers suddenly stepped in aggressively

• Momentum shifted downward

• Weak hands may start selling

This is one of the clearest signals that buyers are losing steam.

🟩 Pattern 5: Bullish Engulfing — The Buyers Take Over

The opposite of the Bearish Engulfing.
A small red candle is followed by a large green candle that fully covers it.
This shows that buyers have overpowered sellers.
It often signals the start of a new uptrend.

When I see this at a support zone, I get excited.
It shows strength.
It shows confidence.
It shows buying pressure rising fast.

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💥 Pattern 6: Doji — Market Confusion or a Turning Point

A Doji is a candle where the open and close are almost the same.
It looks like a thin cross or plus sign.
A Doji tells you the market is indecisive.
Buyers and sellers are in a tug-of-war.

There are different types of Dojis:

• Long-legged Doji

• Dragonfly Doji

• Gravestone Doji

The psychology remains the same:
No one is in control.

A Doji after a strong trend could signal a reversal.
A Doji in the middle of a trend may show consolidation.

🔄 Pattern 7: Morning Star — A Beautiful Bullish Reversal

The Morning Star is a powerful three-candle pattern.
It signals a shift from selling pressure to buying pressure.
It usually appears at the bottom of a downtrend.
It’s one of the strongest bullish signals.

The pattern looks like this:

1. A long red candle (strong selling)

2. A small candle showing hesitation

3. A long green candle showing buying strength

The psychology is clear:

• Sellers were in control

• The market paused

• Buyers regained control

This pattern is highly respected by many traders.

🌇 Pattern 8: Evening Star — Danger Signal for Bulls

The Evening Star is the opposite of the Morning Star.
It appears at the top of an uptrend.
It signals exhaustion and the beginning of a downtrend.
It is a very reliable warning sign.

It has three candles:

1. A strong green candle

2. A small hesitation candle

3. A strong red candle

The message is simple.
Buyers are losing power. Sellers are taking over.

Whenever I see this, I prepare for a possible drop.

📉 Pattern 9: Spinning Tops — Small Body, Long Wicks

A Spinning Top has a small body with long wicks on both ends.
This shows uncertainty and balance between buyers and sellers.
It’s not a strong reversal signal by itself.
But it’s an important warning of indecision.

Spinning Tops appear when the market is tired.
The trend may slow down.
Momentum may be fading.
But it’s not enough to predict a reversal alone.

I usually wait for the next candle to confirm direction.

🔍 Why Candlestick Patterns Work

Candlestick patterns work because they represent human behavior.
When buyers panic, the candle shows it.
When sellers become greedy, the candle reflects it.
Charts don’t lie — emotions do.

Candlestick patterns work because:

• People repeat the same mistakes

• Crowd behavior rarely changes

• Fear and greed drive the market

• Institutions leave footprints

• Patterns appear again and again

Once you learn to recognise them, you’ll see them everywhere.

🧠 How I Use Candlestick Patterns in My Analysis

Whenever I look at a chart, I do not depend on candlesticks alone.
I combine them with support, resistance, and trendlines.
This gives me a clearer picture.
It reduces wrong signals.

Here’s my simple routine:

• Identify the trend

• Look for support and resistance

• Observe candlestick patterns around key levels

• Confirm with multiple signals

• Only then make a decision

This approach keeps me calm and logical.

📊 Candlestick Patterns Near Key Levels Are More Powerful

A Hammer in the middle of nowhere is weak.
A Hammer at a major support zone?
Very strong.

A Shooting Star that appears randomly might not mean anything.
But at the top of an uptrend?
That’s a warning worth paying attention to.

Candlesticks become meaningful when:

• They appear at trendlines

• They form near support and resistance

• They confirm existing momentum

• They follow strong market moves

Context matters.
Candles alone are not enough.
Patterns + location = clarity.

📚 Real-Life Example (Explained Simply)

Imagine a stock that’s been falling for many days.
Everyone is selling, panic is rising.
Then suddenly, you see a Hammer forming at a strong support zone.
The long lower wick shows strong buying pressure.

The next day, a green candle appears.
This tells you buyers are finally stepping in.
This is where many smart investors buy.
Not at the top… but at the turning point.

This is how candlestick patterns help you buy smarter.

📝 Quick Summary (Easy to Remember)

Bullish Signals

• Hammer

• Inverted Hammer

• Bullish Engulfing

• Morning Star

Bearish Signals

• Shooting Star

• Bearish Engulfing

• Evening Star

• Gravestone Doji

Neutral Signals

• Doji

• Spinning Top

These are the core patterns every investor should recognise.
They will help you see price action clearly.

Final Takeaways

Candlestick patterns are not magic.
They do not predict the future.
But they give you insight that most people ignore.
They show you the hidden emotions behind every market move.

If you want to improve your investing game, learn to read these patterns.
Practice every day.
Observe how price moves.
Watch how patterns react near support and resistance.

The more you practice, the clearer the story becomes.

📣 Call to Action

If you want me to break down real charts step-by-step using these candlestick patterns, just reply “SHOW ME” and I’ll create a live demonstration series for you.
And if you’re enjoying this Technical Analysis series so far, let me know — your feedback helps me prepare even better lessons for you.

Let’s continue building your market confidence, one candle at a time.

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I make no representations, warranties, or guarantees, whether expressed or implied, that the content provided is accurate, complete, or up-to-date. Past performance is not indicative nor a guarantee of future returns.

I am an individual content creator and not regulated or licensed by the Monetary Authority of Singapore (MAS) as I do not provide investment services.

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