Dual Candlestick Patterns represent potential trend reversals in the market based on the relationship between two adjacent candles. Traders can use these two candlestick patterns to confirm entry and exit points in trades.
Compared to single candlestick patterns, a dual candlestick pattern provides more information, but it requires more time to identify and confirm.
What Are Dual Candlestick Patterns?
Dual candlestick patterns are formations consisting of two candlesticks that convey valuable information about price behavior. In technical analysis, their interpretation depends on how the two candles are positioned relative to each other.
Types of Dual Candlestick Patterns
Two candle patterns vary in interpretation based on the type of candles and their alignment. Below are the most common Dual Candlestick Patterns used in market analysis:
- Bullish Engulfing
- Bearish Engulfing
- Kicking (Kicher)
- Dark Cloud Cover
- Bullish Harami
- Bearish Harami
- Matching Low
- Piercing Pattern
- Tweezer Bottoms and Tops
Bullish Engulfing Pattern
The Bullish Engulfing pattern is a reversal pattern usually found at the end of a downtrend. It is often ignored in uptrends.
Characteristics of Bullish Engulfing
This dual candlestick pattern consists of a small bearish candle followed by a large bullish candle that completely engulfs the first one. The shorter the bearish candle and the larger the bullish one, the more valid the signal.
Bearish Engulfing Pattern
The Bearish Engulfing is the opposite of the bullish variation. It typically appears at the end of an uptrend and is often overlooked in downtrends.
Characteristics of Bearish Engulfing
It includes a small bullish candle followed by a strong bearish candle that fully engulfs the former. The smaller the bullish candle and the larger the bearish one, the stronger the pattern.
Kicking (Kicher) Pattern
The Kicking (or Kicher) pattern is a dual candlestickreversalsetup that can appear in various stages of a trend. It indicates a reversal bearish in an uptrend and bullish in a downtrend.
Characteristics of Kicking
This pattern includes a candle in the direction of the trend followed by a strong opposite-direction candle that gaps significantly up or down. This emotional shift in buying or selling often reflects a potentialreversal, which can catch traders off guard.
Dark Cloud Cover Pattern
The Dark Cloud Cover is a bearish reversal pattern formed after an uptrend. It is a signal to sell, but is typically ignored in downtrends.
Characteristics of Dark Cloud Cover
The first candle is bullish, and the second opens above the previous close but closes well below the midpoint of the first candle, signaling intensesellingpressure.
Bullish Harami Pattern
The Bullish Harami shows market stabilization and potential bullish reversal in a downtrend. It requires confirmation before entering a trade.
Characteristics Bullish Harami
A small bullish candle is contained within the body of a larger bearish candle. The second candle does not exceed the range of the first.
Bearish Harami Pattern
The Bearish Harami is a reversal signal opposite the bullish version. It's generally ignored in downtrends but is valid at the top of an uptrend.
Characteristics Bearish Harami
This two-candlestick pattern features a large bullish candle followed by a smaller bearish candle entirely within the prior candle’s body.
Matching Low Pattern
The Matching Low pattern indicates short-term support and potential price bounce, often forming at market bottoms.
Characteristics of Matching Low
Both candles are bearish, but the second opens higher and closes at the same level as the first. This setup shows buyer support at a key level.
Piercing Pattern
The Piercing pattern signals a bullish reversal and usually appears at the end of a downtrend.
Characteristics of Piercing
The first candle is bearish. The second opens below the first’s close but closes above the midpoint of the first candle.
- Second candle open: Below the first candle’s close
- Second candle close: Above the midpoint of the first candle
Tweezer Bottoms and Tops Pattern
Tweezer patterns typically appear at the top or bottom of trends. At the tops, they indicate weakening buyers, while at the bottoms, they reflect growing buyer strength.
Characteristics of Tweezer Bottoms and Tops
The highs or lows of both candles are nearly identical, although the candle types differ; at the tops, it is bullish and then bearish. At the bottom, it is bearish and then bullish.
Pros and Cons of Dual Candlestick Patterns
Proper use of Dual Candlestick Patterns requires awareness of their strengths and weaknesses, such as lower prediction accuracy.
Pros | Cons |
Identify potential trend reversals | Lower accuracy in predicting future movement |
Improve market analysis and forecasting | Possible misinterpretation |
Confirm entry opportunities | Require experience and knowledge |
Comparison of Single, Dual, and Triple Candlestick Patterns
Candlestick patterns vary based on the number of candles involved, the information they convey, and their market application.
Comparison of Single-Candlestick, Double-Candlestick, and Triple-Candlestick Patterns:
Parameter | Single Candle | Dual Candlestick | Triple Candlestick |
Number of Candles | One | Two | Three |
Market Application | Quick trend reversal detection | Trend confirmation and entry points | Identifying potential tops/bottoms |
Analysis Speed | High | Medium | Low |
Predictive Power | Low | Medium | High |
Conclusion
Dual Candlestick Patterns offer valuable insights based on the positioning of two adjacent candles. Traders use them to detect trend reversals at highs and lows.
Bearish reversal patterns within a downtrend are often disregarded. Overall, these patterns suggest shifts in power between buyers and sellers.
