Traders often gain profits by determining the price trends beforehand and favorably adjusting their actions. The most preached strategy to find out about stock value is through movement study based on the latest trends. This trend analysis gives an overview of the bull market, or simply the market where the price increases. Unfortunately, it can often turn the cards by trodding down to a bear market. But what is the meaning of the bullish reversal?

When the bear market moves opposite of its downward direction, a bullish reversal takes place. This helps traders spot opportunities for a perfect exit or the chance to indulge in more trading activity. However, an overview is hardly enough to become an expert in recognizing a bullish reversal. Hence, we have created this article to give you more condensed knowledge about the bullish reversal.

What is Bullish Reversal?

Bullish reversal represents a trading pattern when a downside trend on the chart begins to move in the opposite direction. Bullish reversal patterns indicate the possible future rising trend.

 

Is bullish reversal good?

Yes, a bullish reversal pattern is an excellent trigger for BUY trades but only in combination with other technical and fundamental triggers. The best results bullish reversal patterns give when price touch a vital level (weekly high, weekly low, monthly high, monthly low, etc.), the bullish gain can be significant.

The stock market consists of 2 types of players. The first are the people who intend to buy the securities and increase the prices. On the other hand, some people have the intention to sell the shares and lower the prices. Trend analysis is the study of perceiving the opportunities on either side and making sound investment decisions. For instance, a bullish market indicates not to short your stock. Hence, being proficient in the identification of the market stages is crucial for building money making portfolio.

A Japanese candlestick aid in the exhibition of data for the movement of prices of the asset. It comprises up to and down movement along with the summary of opening and closing prices. Thus, it is a prominent tool traders use to analyze the market and pan out the information about asset prices.

The three characteristics of the candlestick are:

• First, the body determines the open and close range.
• Colors are the determinants of the price direction. For example, red and black symbolize a fall in price, while white and green color means an increase in the price.
• Wicks indicate towards the low and high points.

Bullish reversal candlestick patterns

Bullish candlestick patterns are triggered following the downward trends, indicating an inversion in the movement of prices. Traders use this pattern recognition technique to find the suitable time for opening long positions and profiting from this upwards shift.

Bullish candlesticks insinuate many things, including the existence of buying force or a reversal signal. However, here are some patterns that aid the traders in finding their stance in the market for a good day.

The bullish hammer

A bullish hammer is visible near the base of the downward trend. This consists of a long wick that is low while the short body is on the upper side. The name is derived from its semblance. This pattern indicates that even if there is pressure to sell in the daytime, the prices will rise again due to the hefty purchasing pressure. The bull market goes on strong if the color of the candlestick is not red but green.

Bullish inverted hammer

The hammer and inverted hammer are similar in some aspects, with some differences in appearance. The inverted hammer has a short body accompanied by an upper wick that sports a long length. This pattern can be seen in a downward trend after a black body.

This pattern determines that the pressure to sell after the buying trend is insufficient to downward the stock price. Conversely, if it has an upward wick, understand that bulls are trying to take over the market through tactics to raise the price.

The shooting star and inverted hammer are often confused with each other. However, the shooting star is different because it is dominant on rising price trends and indicates a bearish market.

Bullish engulfing

The bullish engulfing pattern consists of 2 candlestick patterns. The first candle has a short body. The other candle engulfs the former. The first candle often sports red and black color and the 2nd one is white or green.

In more situations, the white wick can have a slight upper wick. It determines if the closing price might be the highest of the day. When there is no upper wick, it signals that the prices will be much higher the next day, and this is a white-colored candlestick. A black candlestick may also upper on the following day after witnessing an opening gap.

This bullish engulfing pattern comes out of hiding when the prices are lower on the 2nd day than on the first day. If this does not occur, the white candlestick will not engulf the black-colored candle for the next day.

Bullish Three white soldiers

This occurs in the presence of 3 long bullish candlesticks that gesture towards a reversed downtrend. The three candlesticks have openings that lower after every consecutive one, and the closing price increases every time. The bodies of these candles are long, with a short wick providing an appearance like a staircase.

The bulls are predominant in this pattern, and they lead to high closing prices. These three white soldiers can be utilized as entry and exit points by traders.

If you are leaning towards a bullish position, this might be a good entry point for you. At the same time, you should exit if you have fewer securities. However, before making any decision, make sure to study the pattern.

If these candles are long, short-sellers can take over and lead to a fall in the asset.

 

Bullish morning star

This pattern also consists of 3 candlesticks signaling towards a bottom reversal. The pattern starts with a short candlestick, a red or black long candlestick, that forms a star by gaping down. Candle 3 can be green or white. The first session of the black body is closed by this candle.

The bullish morning star shows a slow downward movement, leading to an upward trend before a bullish move. The market flatlines here because the indecisions vanish, and the pressure to sell recedes. Bulls identify this as an opportunity and curb the shares from being sold.

Bullish piercing line

This pattern favors the bullish market and appears near the bottom of a downtrend. It comprises two candlesticks with long bodies. The black or red candle is followed by a white or green candle that is lower.

This coerces to buy because there is a price hike till the mid-price of the former day. This pattern stays for two days, given the 1st is for sellers and the 2nd is for buyers.

Conclusion

These candlesticks patterns help understand the proper entry and exit points and give important information regarding prices, reversal warnings, and trend signals. 

Once you are proficient in reading these patterns, you can find the changes in sentiments and define downtrend reversals with avenues for long gains. These candlestick patterns are handy in finding out about future trend reversals. However, ensure that you recheck the existence of reversals by following the price actions before indulging in trade.

What is a piercing line candlestick pattern?

Piercing line candlestick pattern or piercing candlesticks represent a two-day reversal pattern on the daily chart from strong bullish trend to downtrend and vice verse. The chart shows this pattern as a substantial gap between the first day’s closing price and the second day’s opening price.

 

What is a bullish piercing candlestick pattern?

Bullish piercing candlestick pattern has the first bearish daily candle, a substantial gap lower from the first day’s closing price to the second day’s opening price and the second strong bullish candle.

A 2-day candlestick valuation pattern spots an efficient short-ended rebound, heading uptrend through a downtrend. This pattern covers the initial day commencing adjacent to highs and ending adjacent to lows, accompanied by a regular or a more extensive business scope.

The piercing pattern also covers a crack downward at the end of day one and initiation of day two, starting from lows and ending adjacent to highs. The closure has to be a candlestick which includes friction of the uptrend length at its minimum from red candlestick from earlier days.

 

What is a bearish piercing candlestick pattern?

Bearish piercing candlestick pattern has the first bullish daily candle, a substantial gap higher from the first day’s closing price to the second day’s opening price and the second strong bearish candle.

Major Outcomes

A two-day candlestick valuation pattern spots an efficient short-ended rebound, heading uptrend through a downtrend and vice versa.
Piercing Pattern gives a projection for five days only on the daily chart
There are three aspects of the pricking pattern that covers a downtrend before the pattern, a crack as the day one ends & a rigid rebound as the 2nd candlestick into the pattern.

Working of Piercing Pattern

Piercing patterns characterize 2 days out of which the 1st day is firmly motivated by auctioneers and the 2nd day is recognized by eager purchasers. This efficiently indicates the number of stock people in the market who wish to auction has reduced to a certain level. Also, the value of shares has dropped to the extent that people are procuring more and has been noted. Such aggression looks dependable for short-term uptrend assumptions.

Formation of the piercing pattern

It is considered among the crucial candlestick patterns that professionally investigate typical marks on the value sequence chart. A duo makes the piercing pattern of successive candlesticks voiced earlier & has 3 more crucial aspects.

A downtrend value anticipates the piercing pattern. (it might be a slight downward flow, yet if the candlesticks are noticed next to rising in value, then it’s not a crucial rebound indication)

Cracks in value initiate from low on the 2nd day. (such pattern is generally observed in stock as its capability of facing cracks overnight compared to rest currencies or all-time flowing resources. However, such patterns might take place in any resource upon a weekly graph).

The 2nd candle should seize beyond the middle spot of the 1st candlestick. (It represents that the purchaser overpowered the auctioneer that day.)

The 1st candlestick is generally dusk colored or red, representing a downward day, and the 2nd is green or luminous colored, representing a day that will close high compared to its opening. Thus, when a dealer is looking for a bullish rebound, a random red candle pursued by a white candle can be a signal to be cautious; however, the piercing pattern proves to be a certain signal as the rebound is mostly unpredictable for major shareholders of the market.

Piercing pattern is a tactical investigation for being an efficient bullish rebound (bearish vice verse). Emergence in its severe mode is not often, however, in the case of performing a good protracted downward trend in its front. At the time of tactical research by Stochastic, MACD, or RSI indicating bullish diversity, a piercing pattern is observed, intensifying the possibilities of the two-day pattern.

White candle reversal on the 2nd day through a downward crack to a median ending higher than expected can also signal that a backing level has arrived. This might happen because the crucial stakeholders of the market have settled the initiating values low compared to a closure of the previous day. As this occurs when the market opens, eager purchasing agents might move forward and switch the values from the commencement of the dealing hours.

Hence, a piercing pattern could be affirmed if it happens on the back front line of a valuation route, where purchasing is already an active part. This pattern is traditionally an efficient indication for a rebound; thus, by concentrating on a piercing pattern, a dealer can think of observing a separating crack. The piercing pattern pursued by a break-away gap can be a rigid indication of rebound happening.

In a bullish rebound, dealers usually get two well-known choices. First, they are allowed to purchase a share from an upward momentum. Also, they might decide to purchase a share in the cash call options with a smacking value beneath the market’s present value.

Amongst the many available indicators in the financial market, triangle patterns are pretty famous and preferred by many traders. A trader can use the triangle pattern in the forex market to better view the movement of the price in the coming future. The trader can also predict the trend that may follow with the help of the triangle patterns.

There are three types of triangle patterns that can be commonly seen in the forex market. Each pattern has its characteristics and different ways to interpret them.  

In this article, you will read about different types of triangle forex patterns, how they can be interpreted and how to trade with the help of these patterns.

What Are Triangle Patterns?

Triangle patterns represent triangle-like shapes on trading charts which usually refer to a trend continuation.

A triangle pattern in forex is a pattern that can be seen primarily in the middle of a trend. This pattern usually indicates that the trend will continue. This pattern is straightforward to be traced on the price chart. It is made up of two lines that converge at a point. Both the lines are formed, joining the movement of price in the market. There is an upper trendline that joins the high points and a lower trendline that joins the lows. When the price movement breaks out of this pattern in the same direction as the ongoing trend, the traders plan to enter the market. 

There are many charts available for technical analysis in the market. But the most commonly used by traders are only three or four. The trader can learn and use the triangle patterns on the chart they are familiar with.

What is a Symmetrical Triangle Pattern?

Like any other triangle pattern, this pattern is drawn by joining two converging trendlines on a chart. This particular triangle pattern is also seen as a starting point for all other triangle patterns in the market. While different patterns may depict that they bend towards a specific direction, a symmetrical triangle is more direction neutral. That is, it does not fall or turn in any order. But, just like other triangle patterns, this pattern also indicates the continuation of the ongoing trend. And so, here also, traders look for breakouts towards the current trend.

How to Trade with a Symmetrical Triangle Pattern?

One of the benefits of trading with a triangle pattern is that it comes with its measuring technique. This technique can be used in any triangle pattern. Traders can calculate the ‘take profit’ target and trade accordingly.

To measure this ‘take profit’ target, the trader has to measure the distance between the upper and lower trendline at the beginning of the pattern and use the exact measurement to determine the profit target after the breakout occurs.

Amongst other triangle patterns, the symmetrical triangle is rare to find. That is why traders are advised not to blindly jump into trading and make sure they have not made any mistakes while spotting the triangle pattern.

Ascending Triangle Pattern

The ascending triangle pattern represents a rising trend pattern that implies a flat top with higher lows and shows the beginning of a bullish trend.

The ascending triangle pattern can be identified with a flatter upper trendline and a rising lower trendline. The flat upper trendline acts as a support or resistance to the price movement, while the increasing lower trendline indicates the higher lows. These higher lows show that the buyers are more active than the sellers. When there is a breakout in the pattern, it usually follows the uptrend or bullish trend. 

Apart from all the indicators available as an option to all the traders, an ascending triangle can give assurance of the price action predictions. Appearing in the middle of the trend, it is also known as a continuation pattern. This pattern helps anticipate the move of the trend in the market and helps the traders plan their trade accordingly.

Read this article to understand ascending triangle patterns and how to trade with ascending triangles.

The ascending triangle is a pattern that can be identified with a straight upper line, which is also the support line of the pattern. The lower line of the triangle is slanting upwards, marking the higher lows. This pattern indicates that a bullish trend is approaching as the buyers are more active than the sellers when this pattern appears. The breakout in the pattern confirms the continuation of the bullish trend.

The ascending triangle may confirm that a bullish trend is approaching, but whether it is a continuation of the direction or a reversal depends upon where the pattern occurs in the trend. For example, if the pattern is seen during a downtrend or maybe at the bottom of it, it may mark the end of the downtrend and hence the reversal in the trend. So, the traders should be aware of the location of the ascending triangle.

 

The traders who have been trading in the forex now will quickly identify the ascending triangle pattern in the charts. Following are some key points that traders can look for to identify the pattern more easily:

• Upward Trend: Traders are always advised not to blindly jump into trading once they spot an ascending triangle in the trend. They should make sure if the market were in an upward trend before they saw the ascending triangle.

• Consolidating Market: Traders should be aware when the market becomes consolidated because that is when the ascending triangle may appear in the market.

• Rising lower trendline: Ascending triangle is characterized by its upward slanting bottom line. This line is drawn to join the lows in the trend, which shows the situation of a rising low. This indicates that the market is entering a bullish trend due to more active buyers than sellers.

• Flat Support Line:  The support line or the upper line is flatter and works as a support or resistance for the trend. In simple words, if you look at the pattern, whenever the price touches this line, it bounces back before the breakout occurs.

• Continuation in Trend: The bullish trend continues after the price breaks out of the upper trendline. To confirm the continuation of this trend, the trader must look if the price continues to move upward.

How to Measure Ascending Triangle? 

While many traders may know how to measure the ascending triangle, many may not see that pattern comes with its in-built profit measuring technique.

It’s a simple technique with merely two steps to measure the profit the trader should aim for or can expect after the breakthrough in this pattern, stating that the trend must continue.

The first step of the two is to measure the distance between the lowest point that lies on the bottom trendline and the flat upper line at the beginning of the pattern. The next step is to take the same distance and measure the possible profit from the breakthrough point.

Using this technique, the trader can aim for profit and plan his trading accordingly.

Ascendant Triangle Advantages and Drawbacks

The ascending triangle is a trader-friendly pattern. It helps the trader understand the trend if there will be a reversal or continuation in the trend. But everything comes with its limitations, and the ascending triangle is no exception to that fact.

Advantages

• This pattern is easier to identify. Even beginners can do trace this pattern with little knowledge.
• This pattern can confirm the continuation or reversal of an upward trend, attracting more and more buyers.
• Its in-built measuring technique is easy to use and helps the trader identify the possible profits.

Drawbacks

• Since the trend in this pattern is confirmed only after the breakout, there can be a false breakout. So the traders are advised to have good risk management.
• It is not always necessary that the price will move within the pattern. It can or may move lower or sideways of the triangle.

How to Trade with Ascending Triangle?

Just like the symmetrical triangle pattern, a trader can measure the distance between the flat upper trendline and the ascending lower trendline and use the same distance to measure the profit target after the breakout. Traders are advised to ensure that the trend follows after the breakout and is not a false breakout. 

Descending Triangle Pattern

Just like the name, the descending triangle pattern is quite the opposite of the ascending triangle pattern. This pattern has a flatter lower trendline and a downward slanting upper trendline. Here, the flat lower trendline acts as a support or resistance, and the upper descending trendline indicates the lower highs. The lower high shows that the sellers are more active in the market as compared to buyers. 

How to Trade Descending Triangle Pattern?

Unlike symmetrical and ascending triangle patterns, the breakout in descending triangles usually occurs with a downward trend, which indicates that the buyers sit back and the sellers try to bring the price down. This break from the lower support line encourages the trader to go short. Traders put a stop loss just above the slanting upper trendline. But the take profit target here is used by calculating the same distance at the beginning of the pattern and putting it downwards at the beginning of the breakout. 

Conclusion

After reading all three types of triangle patterns, the trader must try to keep the following points in mind while trading these patterns.

1. The trader must be aware of the trend preceding the triangle pattern formation. This is one of the critical points to determine the future movement of the price. 
2. Traders must adequately understand how to use the measuring technique discussed above to identify the profit target.
3. Traders must look out for false breakouts that are not uncommon. They must also have a sound risk management plan to battle any unexpected loss. 
4. The trader must be efficient in distinguishing between the upper and lower trendline to understand which type of triangle pattern will occur. 
5. Traders are also advised to first practice identifying these patterns before actually trading with them. Because of their similar looks, traders can get easily mistaken. 
6. It is crucial to understand that traders must understand what the price action indicates instead of looking for the desired pattern in the forex price chart.

Traders use Pennants to calculate further movements of the market as they are prolonging patterns visible on the forex market. Just as the triangle pattern, the Pennant pattern also has some notable differences worth knowing for traders. This article will help learn pennant chart pattern recognition, what they intend, its cause, and most considerably, how to apply them for more effective trade results.

What is a pennant pattern?

A pennant pattern (flag pattern) is a breakout chart pattern that follows the main price trend and has a rectangular shape resembling a flag. It suggests if the trend would continue for a long time frame or would be reversed in a swift motion.

Pennant Pattern features

Pennant pattern is a breakout chart pattern. It is preferred when a large ascending or descending movement is noted by security. Before any further movement in a similar direction, a detailed alliance is made. The pennant pattern appears to be a minute, evenly arranged triangle, and it is made from several forex candlesticks. Pennant patterns are generally mentioned in two types as bullish or bearish, which depends on the direction of their movement.

While you take a glimpse of the Pennant prolongation pattern, below-written details would be noticed:

• A flagpole: A Pennant pattern regularly commences from a flagpole, thereby differentiating it from such other patterns (like the evenly arranged triangle). The first subsequent and robust movement introducing the evenly arranged triangle is called a flagpole.
• Breakout levels: One breakout will be found at the ending of the flagpole, and the second will happen after the strengthening cycle, where ascending or descending drift will keep going.
• The Pennant itself: The triangular design formed at the time of market consolidation, happening in the midst of the breakout, and the flagpole is called the pennant. The two merging trend lines generate the triangle, called the Pennant.

Bullish Pennant Pattern

The bullish pennant chart pattern or bull pennant represents the bullish breakout pattern during the main bullish trend, after a short period of consolidation, formed in an area less than 50% of bullish retracement.

Figure 1: Bullish pennant pattern

Prolonging candlestick patterns, which take place in a solid upward moment, is called Bullish Pennants. The Pennant formation happens when the flagpole rises, a concentrated time span, and then prolongs the rising post to the breakout. Dealers keep looking for discontinuity on to the top of the pennant so that they can have the benefit of the improved bullish power.

Bearish Pennant Pattern

The bearish pennant or bear pennant represents the bearish breakout pattern during the main bearish trend, after a short period of consolidation, formed in an area less than 50% of bearish retracement.

Figure 2: Bearish pennant pattern

Bearish Pennants and Bullish Pennant are inversely proportional to each other. Pennants formed by prolonging patterns that appear in rigid droops are known as Bearish Pennants. Bearish Pennants always commence from a flagpole – a saturated price drop, chased by a break during descending movement. This break develops a triangle shape, which is called a Pennant. Then comes breakout, and the descending activity prolongs. Traders keep an eye to access precise deals on a gap beneath the pennant.

Difference Between Triangle Pattern and Pennant Pattern

• A Pennant pattern is supposed to be scouted by a solid ascending or descending move that features a flagpole. If the flagpole is not present, it won’t be a pennant but just a simple triangle.
• A shallow retracing has been developed by Pennant (Generally, it is not more than 38% of the flagpole). A deep retracing demonstrates a triangle instead of a Pennant.
• Prolongation of the ascending or descending trend distinguishes a pennant.
• A Pennant is a compressed pattern that is generally concluded within a week or three. It is a triangle pattern that takes more time to develop.

Trading the Bearish Pennants and Bullish Pennants

While trading, the approach is made to Bearish Pennant and Bullish Pennant patterns will be the same, but the Bullish Pennant would have a sustained inclination while the Bearish Pennant will have an un-sustained inclination. The case below shows the way to deal with a Bullish Pennant noticed in NZD/GBP.

After an abrupt and acute price movement, a dealer should examine to access the deal on an affirmation of a breakout. Post to an abrupt and acute price movement, the pennant shows favorable signs for a breakout and prolongation regarding the first movement.

Candlestick closing upon the pennant avails the entrance. In this case, the break changed into a considerable substitute and brought the chance of an endured upward flow.

Observing a quite big move, break-in damage can be located at the shallow of the breakout candle or, more traditional traders can locate a stop underneath the pennant limit to minimize the risk. This technique usually provides a convincing level of shield to the traders.

The Bottom Line

Traders should consistently endorse reasonable risk management because the market is always unpredictable. Because of this, never trade with a principal that you cannot afford to give up.

Measuring the space between commencement of the flagpole and the Pennant can help traders to set the target level, later on, duplicating this gap against the breakout in rates and then pursuing the Pennant.

Hopefully, the knowledge delivered in this article proves to help understand pennant patterns, their types, and trading methods.