In other articles on MEXC Learn, we have introduced the basics of K-line (Candlestick) charts. In the following two articles, we will discuss common bullish and bearish candlestick patterns. Let's start with the bullish candlestick patterns. As the name suggests, these patterns indicate a higher probability of an upward trend in the market after their appearance. Common bullish candlestick patterns include the following: ①Hammer Pattern ②Inverse Hammer Pattern ③Bullish Engulfing Pattern ④Morning Star Pattern ⑤Three White Soldiers Pattern.
It is essential to note that, unlike traditional financial markets, cryptocurrency candlestick charts show green for price increases and red for price decreases.
The hammer candlestick pattern is usually found at the bottom of a downtrend. The hammer pattern typically indicates that the bullish/buying pressure is strong, and despite selling pressure, strong buying power eventually pushes the price back up, forming the hammer pattern. The appearance of the hammer pattern indicates a higher probability of a subsequent upward trend.
The inverted hammer candlestick pattern has a small body and a long upper shadow. It usually appears at the bottom of a downtrend and serves as a potential bullish reversal signal. If the inverse hammer pattern forms near a significant support level, the bullish signal becomes even stronger.
The bullish engulfing pattern consists of two candlesticks, one bearish candlestick followed by one bullish candlestick. It often appears at the end of a downtrend. The last bearish candlestick is completely engulfed by a larger bullish candlestick. The bullish engulfing pattern occurs because, at the end of a downtrend, the selling pressure weakens, and the buying pressure strengthens.
The Morning Star is a classic bullish candlestick pattern and often signals a trend reversal at the bottom. Therefore, this pattern is especially significant when it appears within a downtrend.
The Morning Star pattern is composed of three candlesticks. The first candlestick is a bearish candlestick formed by panic selling, resulting in a large bearish candle. The second candlestick shows a small range of fluctuations, forming the body of the star, which can be either a bearish or bullish candlestick. The third candlestick is a large bullish candlestick, indicating that the buying pressure has completely absorbed the selling pressure.
Three White Soldiers is a relatively common bullish pattern. It refers to three consecutive bullish candlesticks that appear after a bearish candlestick. When this candlestick combination occurs, it indicates a higher likelihood of further upward movement. The effectiveness of the Three White Soldiers pattern depends on the size of the bodies of the three bullish candlesticks. The larger the bodies, the higher the probability of subsequent upward trends.
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