CandleSticks Stock Screener

How to Read a Candlestick Screener 

A candlestick is a visual depiction of the price movement and its size. A candlestick chart consists of numerous vertical bars called ‘candles’ that make the chart. Each candle has three parts – the body, upper shadow and lower shadow. The body is either red or green, and each candle represents a period and the trades executed within the period. A candle has the following data points:

a.    Open – It represents the price of the first trade in a period. 
b.    Close - It represents the price of the last trade in a period.
c.    High and Low – The highest and lowest price of a period correspondingly. 

The body represents the opening and closing trading price within a period. Also, the body colour signifies a rising or falling trend. Therefore, if a candlestick chart for a week has consecutive red candles, it indicates a price fall. 

There are vertical lines over and under the body called wicks or shadows, displaying the traded price's lows and highs. Shadows can be long or short. For example, if the upper wick on a red candle is short, the stock opens near the day's high. 
 

Types of Candlesticks 

Individual candles provide adequate information about prices and volumes. However, identifying patterns is only possible by evaluating a candle with its preceding and succeeding candles. Candlestick patterns help to understand investor sentiments and trends. 

Broadly, there are two categories of candlestick patterns – reversal and continuation. Continuation patterns are an indicator to analysts to follow an existing trend, whereas reversal patterns signal traders to enter or exit a trade before the start of a trend.

Below is a list of patterns available on a candlestick pattern scanner. 

1.    Hammer Pattern 

The hammer pattern is a bullish indicator. Typically, the pattern has a long lower wick and short body candles. You can identify the hammer pattern at the end of a bearish trend. The hammer pattern occurs in case of a price rise despite frequent selling pressures. A green body signifies a tougher bull run than a red body.

2.    Inverted Hammer Pattern

An Inverted Hammer Pattern is a bullish reversal pattern and appears on a downtrend. It indicates that buyers will gain control. The candle has a short body and a long upper wick in the inverted hammer pattern. It signals possible buying immediately following a selling pressure. 

3.    Shooting Star

The shooting star is a reversal pattern that happens on an uptrend. It is visible at the peak of an uptrend. The pattern is a warning sign for traders with a long position and indicates strong selling pressure. The candle has a long upper wick and a short body. Generally, the market rises slightly compared to the previous trading day and increases marginally before crashing like a shooting star. 

4.    Hanging Man

The hanging man is a bearish reversal pattern that occurs at the top of an upward trend. The candle has a long lower wick and a short body. It signals the reversal of a bullish trend and a transfer of market control to the bears. It occurs when the stock supply is greater than the demand.

5.    Dark Cloud Cover

The Dark Cloud Cover is a reversal pattern. The pattern appears when a bearish candle opens above and ends below the middle of the previous bullish candle. Both candles must be large to signal increased volumes. Traders look for a following bearish candle that indicates a price decline.

6.    Doji

The Doji is a bearish reversal candlestick pattern. It looks similar to a cross since the opening, and closing prices are equal or nearly identical. The Doji pattern on an uptrend is a caution signal caution to investors. It depicts the uncertainty between buyers and sellers.

7.    Bullish Engulfing

The Bullish Engulfing is a reversal pattern and occurs on a downward trend. Bullish engulfing is an indicator of a potential price rise and is a signal to purchase the stock. Primarily, the pattern has two candlesticks. A large green candle engulfs a short red one. The pattern drives the price even if the opening price is lower than the previous trading day.

8.    Bearish Engulfing

The Bearish Engulfing is the opposite of a bullish engulfing pattern. It is a reversal pattern on an upward trend and signals caution. In this pattern, a large red candle engulfs a short green change. Typically, bearish engulfing occurs at the peak of an uptrend and signals a slump in the marker. The lower the red candle, the higher the downtrend significance. 

9.    Bullish Harami

The Bullish Harami pattern is a reversal indicator for a bear trend. A small bullish candle follows a large bearish candle in the Bullish Harami pattern. In a bear market, the market moves down and creates a long bearish candle. Subsequently, the prices increase and indicate buying pressure. 

10.    Bearish Harami

The Bearish Harami pattern is a reversal on an upward trend. Short Traders use this pattern to identify short opportunities. The market surges in its bull run and creates a long-body bullish candle. In the following period, markets open down to create a Bearish Harami pattern. 

11.    Piercing Line Pattern

The Piercing Line Pattern involves two candles pattern – a long green candle that follows a long red candle. Additionally, the second candle’s closing price must be halfway above the first candle’s body. The Piercing Line Pattern indicates buying pressure and a potential reversal from a downward trend.

12.    Morning Star Pattern

The Morning Star Patter is a three-candle formation. It includes a long red and a long green candle. There is one candle with a short body between the two long candles. Morning Star Pattern avoids any intersection between long and short candles. It is a bullish reversal pattern and signals reduced selling pressure. 

13.    Three White Soldiers Pattern

The Three White Solder Pattern involves three green candles with small wicks. It is a bullish reversal pattern and a strong indicator of a potential bull trend after a reversal. These candles’ open and close prices exceed the previous day’s prices. 

14.    Three Black Crows Pattern

The Three Black Crows Pattern has three consecutive red candles with short wicks. These candles’ open and close prices are below the previous day’s trading price. It is a bullish reversal indicator. It forms at the end of an upward trend. 

15.    Three Inside-Up Screener Patterns

The Three Inside-Up Pattern consists of three candlesticks, indicating a bullish reversal.  The first is a long bearish candle followed by a small bullish candle in the range of the first candlestick. The third candlestick is a long bullish candlestick that confirms the reversal.

16.    Three Outside Up Screener

The Three Outside Up Screen involves three candlesticks – a short bearish candle and a large bullish candle that covers the bearish candlestick. The third is a long bullish candlestick that validates a bullish reversal trend.

17.    Spinning Top

The Spinning Top candlestick pattern is like the Doji. The difference between the Spinning Top and Doji pattern is in its formation. The l body of the Spinning Top is bigger than Doji. Spinning Top signals market uncertainty.  

18.    White Marubozu

The White Marubozu is a single candlestick pattern. It appears after a downtrend and indicates a bullish reversal. The candlestick has a long body without any lower or upper shadows. It indicates buying pressure and signals an upward trend.

19.    Black Marubozu

The Black Marubozu is a single candlestick pattern created after an upward trend and signals a bearish reversal. The pattern has a long bearish body candle. It does not have any upper or lower shadows. It shows that the market exerts selling pressure and may turn downwards. The Black Marubozu is a caution signal and an indicator to close any open buy positions. 

20.    Tweezer Bottom

It consists of a bullish and a bearish candlestick. These candlesticks have the same or nearly the same low. It is a bullish reversal pattern formed before a downtrend.  

21.     Rising Window

The Rising Window consists of two bullish candlesticks and a gap between the high and low of each candlestick. The space between the candlesticks is on account of high trading volatility. It is a trend continuation pattern that signals strong market purchasing power. 

22.    Falling Window

The Falling Window is the opposite of the Rising Window candlestick pattern. Two bearish candlesticks and a gap between them form the Falling Window pattern. The gap refers to the distance between the top and bottom of the candlesticks. The pattern signifies high volatility and strong selling pressure in the markets. 

23.    On-Neck Pattern

The on-neck candlestick pattern appears at the end of a downward trend. A small bullish candle follows a long bearish body candle. The small bullish candle gaps down at the start but later ends near the previous candle’s close. The close price of both candles is similar or the same, forming a horizontal neckline. It is called a neckline because the two closing prices are the same or almost the same across the two candles, forming a horizontal neckline.

24.    Bullish Counterattack

The Bullish Counterattack pattern indicates a potential reversal of the current downward trend. It is a two-bar pattern and must satisfy the following conditions – 

a.    The first candle must be long and red with a real body. 
b.    The second handle must be long and the same size as the first candle. The only difference is that the second candle must be green. 
c.    Lastly, the market must be in a strong downward trend for a bullish counterattack.

Which candlestick pattern is most reliable? 

Various candlestick patterns are useful for identifying bullish and bearish trends. From these, Doji is the most reliable pattern. Doji is a single candlestick pattern with a thin and tiny body. Therefore, it is easy to identify. 

By itself, Doji may be useful but gains importance if it appears during a prevailing trend. It signals a pause in trend and uncertainty. There are two modifications to Doji - Dragonfly and Gravestone Doji. Both modifications indicate a reversal in the current trend. 

How to analyse candlestick patterns? 

You can analyse candlestick patterns through multiple methods. Decide the time frame and preferred trading strategy before analysis. The trading strategy may be to recognise patterns or benefit from candle formations.

Individual candlesticks provide an understanding of the current market sentiment. Candlesticks like the Hanging Man, Hammer and Shooting Star signal a change in direction and potential price direction. Also, candlestick charts enable traders to identify price patterns in charts. Price patterns such as the bullish engulfing or triangle patterns provide entry and exit signals for a trade or the market. 

Examples of Candlestick Screener 
Consider practical examples of a candlestick pattern screener and its effect on investment decisions. 

Example 1 – Bullish Engulfing Pattern

The bullish engulfing combines a red candle and a green candle; The green candle surrounds the red candle. It indicates the end of a bullish trend and signals weakness. After the green candle closes, you can identify the bullish engulfing pattern and execute a long position. It is important to note that the price pattern appears only after the close of the second candle.

Example 2 – Hammer Formation

Continuing the above example, you can use the hammer formation with a bullish engulfing pattern. The hammer pattern appears at the end of a downward trend and signals reversal. You can set a stop loss below the bullish engulfing pattern for the hammer formation. This ensures a tough stop loss and predefined profit. 

Conclusion
While the candlestick patterns discussed above provide useful insights, these signals are only sometimes accurate. Therefore, you must use other technical indicators combined with in-depth fundamental analysis to make an informed decision.

The candlestick pattern screener allows you to customise based on your preference and trading strategies. You may either edit or create your screener.