Building upon your understanding of single candlestick patterns, this installment of the AscendEX LingDong Academy on futures investment delves into the realm of common candlestick pattern combinations. 

A candlestick pattern combination refers to the arrangement of multiple individual candlesticks to form a larger pattern. These combinations often convey stronger market trend signals compared to single candlesticks. Mastery of these pattern combinations assists investors in swiftly identifying market trends, making informed analyses, and seizing opportunities.

Below are seven common candlestick pattern combinations, accompanied by insights into their basic structures, trend implications, and real-world scenarios for your reference and learning.

 

I.      Morning Star 

This pattern is composed of three candlesticks:

  1. A long bearish candle during a downtrend.
  2. A smaller-bodied candle that gradually shrinks to form the "star" shape.
  3. A large bullish candle with a body that engulfs over half of the first bearish candle's body.

The "Morning Star" signifies the arrival of brightness. Appearing during a downtrend, this pattern is a highly reliable reversal signal, indicating the end of the downtrend and the potential for a bullish market. 

Scenarios:

 

II.        Evening Star 

This pattern is composed of three candlesticks: 

  1. A long bullish candle during an uptrend.
  2. A smaller-bodied candle that gradually shrinks to form the "star" shape.
  3. A large bearish candle with a body that engulfs over half of the first bullish candle's body.

 

The "Evening Star" signifies the approach of darkness. Emerging during an uptrend, this pattern is a relatively reliable reversal signal, indicating the end of the uptrend and the potential for a bearish market.

Scenario:

 

III.      Engulfing Patterns 

The "Engulfing Pattern" consists of two candlesticks with differing sizes and opposing directions. 

As the name suggests, the "Engulfing Pattern" emphasizes the comparison between the sizes of two candle bodies. This pattern frequently occurs and serves as an effective trend reversal signal. Here are two main categories:

1.    Bearish Engulfing

This pattern appears in an uptrend with the first bullish candle followed by a bearish candle that engulfs the entire body of the first candle. This signals a potential reversal to a downtrend.

Scenarios：

 

2.     Bullish Engulfing

This pattern appears in a downtrend with the first bearish candle followed by a bullish candle that engulfs the entire body of the first candle. This signals a potential reversal to an uptrend.

Scenarios:

 

IV.       Double Top     

The "Double Top" pattern consists of two or more candlesticks with their highest prices at the same level.

This pattern appears in an uptrend and serves as a topping signal. It indicates that the resistance at this price level is strong, suggesting the potential end of the uptrend and a reversal to a downtrend. 

Scenarios:

 

V.        Double Bottom  

The "Double Bottom" pattern consists of two or more candlesticks with their lowest prices at the same level.

This pattern appears in a downtrend and serves as a bottoming signal. It indicates that the support at this price level is strong, suggesting the potential end of the downtrend and a reversal to an uptrend. 

Scenarios:

 

VI.      Three Black Crows 

The "Three Black Crows" pattern consists of three bearish candlesticks: 

  1. Each candle closes near its lowest point.
  2. Each candle opens within the body of the previous candle.
  3. Each candle closes lower than the previous one.

This pattern is strong evidence of a downtrend. With distinct candle bodies and consecutive lower closing prices, it indicates prevailing bearish momentum. 

Scenarios:

 

VII.      Three White Soldiers

The "Three White Soldiers" pattern consists of three bullish candlesticks: 

  • Each candle closes near its highest point.
  • Each candle opens within the body of the previous candle.
  • Each candle closes higher than the previous one.

The "Three White Soldiers" is the opposite of the "Three Black Crows" and its name evokes images of "soldiers advancing," indicating a strong uptrend. It displays prevailing bullish momentum with distinct candle bodies and consecutive higher closing prices. 

Scenario: