Bearish Candlestick

Gravestone Doji (Bearish)

a. How to recognise it?

• The must be a preceding uptrend.
• It looks like an inverted "T" letter.
• The opening, lowest and closing price are the same.
• It has no real body but a long upper shadow.

b. What is the psychology behind?

• When the market opens, the bulls push the price all the way up, resulting in a long upper shadow.
• The bears fight strongly and eventually manage to drag the price back down to the opening level.
• The longer the upper shadow, the more effective the bearish signal. It tells us that the bears are strong enough to conquer the bulls who once drove the price so high.

c. How do we trade it?

• Look for the Gravestone Doji at the top of an uptrend. Wait for the next candle to close below the low of the Gravestone Doji to confirm the existence of bearish force. 
• Open a short position upon confirmation.
• Place a stop-loss above the high of the Gravestone Doji.

Shooting Star (Bearish)

a. How to recognise it?

• The must be a preceding uptrend.
• It looks like a flying meteor carrying a long tail.
• The closing price is below or near the opening price, forming a tiny body.
• The real body could be green or red.
• It has no or little lower shadow.
• The upper shadow is at least twice of the length of the real body.

b. What is the psychology behind?

• Similarly to Gravestone Doji, when the market opens, the bulls push the price all the way up, resulting in a long upper shadow.
• The bears fight strongly and eventually manage to drag the price back down to the opening level, forming a little square body.
• The longer the upper shadow, the more effective the bearish signal. It tells us that the bears are strong enough to conquer the bulls who once drove the price so high.

c. How do we trade it?

• Look for the Shooting Star at the top of an uptrend. Wait for the next candle to close below the low of the Shooting Star to confirm the existence of bearish force. 
• Open a short position upon confirmation.
• Place a stop-loss above the high of the Shooting Star.

Dark Cloud Cover (Bearish)

a. How to recognise it?

• There must be a preceding uptrend.
• A green candle followed by a red candle.
• The red candle opens with a gap-up and closes at 50% or below of the real body of the green candle.

b. What is the psychology behind?

• The green candle implies the control of the bulls following a prolonged uptrend.
• In the next session, the market opens above the high of the green candle, suggesting the continuation of the bullish forces.
• The bulls then lose momentum, the bears conquer and send the price down during the session, and eventually manage to wipe out 50% gains or more from the previous session.

c. How do we trade it?

• Look for the Dark Cloud Cover at the top of an uptrend.
• Wait for the next candle to close below the low of the red candle to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the red candle.

Tweezer Top (Bearish)

a. How to recognise it?

• There must be a preceding uptrend.
• A green candle followed by a red candle.
• Both candles have the same high.

b. What is the psychology behind?

• The candles in both sessions form the same high, suggesting that the market refuses to go above that price level. Once the price touches the ceiling, it retreats. That price level may be viewed as a short-term resistance.
• The closing price of the red candle shies away from the high further than the green candle does. It shows that the bearish forces are getting stronger.

c. How do we trade it?

• Look for the Tweezer Top at the top of an uptrend.
• Wait for the next candle to close below the low of the two candles to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the two candles.

Three Black Crows (Bearish)

a. How to recognise it?

• There must be a preceding uptrend.
• Three consecutive long red candles observed.
• The second and third candle open within the body of the preceding one but closes lower than the preceding one.

b. What is the psychology behind?

• The first long red candle signals that the bulls are exhausted after the prolonged uptrend and the bears start to take over. The bears continue the slump with the subsequent two candles closing lower.

c. How do we trade it?

• Look for the Three Black Crows at the top of an uptrend.
• Wait for the fourth candle to close below the low of the third candle to confirm the reversal.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the first red candle.

Evening Star (Bearish)

a. How to recognise it?

• There must be a preceding uptrend.
• The first candle has a long and green body.
• The second candle opens with a gap-up and has a tiny green or red body.
• The third candle opens with a gap-down and closes at 50% or below of the first candle.

b. What is the psychology behind?

• The first long green candle implies the dominance of bulls in the uptrend.
• The gap-up of the second candle further confirms the bullish force but the tiny candle body tells us that the bull starts to lose momentum.
• The gap-down of the third candle indicates that the bears are overriding the bulls and eventually manage to eliminate 50% gains or more from the first long green candle.

c. How do we trade it?

• Look for the Evening Star at the top of an uptrend.
• Wait for the fourth candle to close below the low of the third red candle to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the second candle.