Many
traders like to play both sides of an asset’s price action. But in
order to play the bullish and bearish trends, one needs to be aware of
the positive and negative signals contained within various candlestick
patterns.
Knowing how to interpret candlesticks adds insight to
the signal provided by various technical analysis indicators and the
path a digital asset might take.
Here are five more bearish candlestick patterns every trader should know.
Tweezer Top
Like
the Tweezer Bottom, the Tweezer Top is a trend reversal pattern that
indicates buyers are running out of steam and the approaching end of an
uptrend.
In
this pattern, both candlesticks will have the same high and alternating
colors with the left candle being green and continuing the uptrend and
the following candle (red) showing weakness.
Many times, the real
body length of both candles is identical but more confirmation comes
when the left (green) candlestick body is longer than the right
candlestick.
When observing this pattern, traders typically look
to see if its occurrence corresponds with a market high or near a key
resistance or trendline.
Three Black Crows
The Three
Black Crows pattern is the inverse of the Three White Soldiers
formation. The pattern signals that a strong reversal is in the making
and recognized by the three long downward plunging candlesticks.
As
shown by the diagram, the open of each day is a little higher than the
previous close but the price closes each day at lower levels. To confirm
the pattern, the last two candlesticks should open within the real body
of the previous candlestick but close lower.
Three Inside Down
The
Three Inside Down pattern can be found right at the top of an uptrend
and signals that a reversal is in order. The candlestick pattern shows
the first candle as a long bullish (green) one reaching the top of the
uptrend. Then the following candle body dips to the middle of the first
candle.
The
third candlestick closes below the real body of the first candlestick,
which is confirmation that sellers have taken control of the asset’s
price. Rather than wait for confirmation of the Three Inside Down
pattern, many traders interpret the inside bar candle of the middle
(2nd) candlestick as a sign of indecision and hint that the price could
be reversing course.
Traders will also observe other indicators
like the moving average convergence divergence (MACD), relative strength
index (RSI) and exponential moving averages to determine whether or not
the uptrend is reaching exhaustion.
Bearish Advance Block
The
Bearish Advance Block frequently appears on cryptocurrency price action
charts and is a candlestick pattern all traders should become familiar
with.
In
a nutshell, the pattern signals weakness within an uptrend as the price
continues to push higher but the real bodies of each candlestick become
shorter and shorter, indicating a decrease in momentum and increasing
indecision of traders.
As shown by the diagram, it appears that
buyers remain in charge with each candlestick painting a wick with a
higher high and the price closing higher each day. But the telling sign
is that the wick of each candlestick becomes longer and longer as the
real bodies become shorter. The distance between each daily close also
becomes shorter.
Bearish Breakaway
The Bearish Breakaway
pattern is a short-term reversal signal that begins with a long bullish
candlestick. The following candlestick gaps upward and continuation is
seen through the third and fourth day.
To
traders, the uptrend appears to gain momentum after the gap up of the
second day but the shortness of the third and fourth candlestick and
longer shadows on each candlestick suggest that the uptrend is losing
steam.
The fifth (last) candlestick is a long bearish candlestick
that clears the previous gains of the last three candlesticks and
closes slightly above the gap created between the first and second
candles.
source link : https://cointelegraph.com/news/5-more-bearish-candlestick-patterns-every-bitcoin-trader-must-know
