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·         The Shooting Star is essentially a single candle bearish reversal pattern but is enhanced in its’ interpretation if read as a three candlestick pattern.

·         The session prior to the Shooting Star should ideally be a long white bullish candle with a gap up to the shooting star candle.

·         The Shooting Star candle has a wick that is at least twice the length of the real body with little or preferably no wick to the downside.

·         If the Shooting Star candle is dark then it is a bit more bearish.

·         The longer the upside wick the better the probability of a strong reversal.

·         The reversal is confirmed when the stock gaps down after the Shooting Star session and trades down with a dark candle.

·         If large volume is associated with the Shooting Star candle it indicates that the investment community attempted to take the stock higher and the consensus of opinion was that the stock couldn’t justify the higher price level.

·         The Morning Star candlestick pattern is the mirror image of the Evening Star except it is found at the bottom of a downtrend.

·         The pattern consists of three candles with the first candle being a long and dark followed by a gap down to a doji or Spinning Top and finishing with a gap up to a long white candle.

·         The second candle indicates indecision and the third and final candle in the formation confirms the bullish reversal.

·         The confirmation candle (The third candle) is much more convincing if it closes at least half way into the first long dark candle.

·         Increased volume on the second and third candle will also confirm that the sentiment is changing as the bulls take the upper hand.

·         The Evening and Morning Star candlestick formations are in my opinion two of the strongest reversal patterns in technical analysis.

·         The validity of the formation is strengthened when confirmed by other indicators such as support and resistance zones, trend lines, major moving averages and chart patterns.

·         The Bullish Harami is a two candlestick reversal formation found at the bottom of a trend.

·         The first candle of the formation is a long dark candle and the second is white.

·         The open of the second candle is higher than the close of the first candle and the close is below the open of the first candle.

·         Western technical analysis refers to the formation as an “Inside Day” when the both the real body and the shadows of the second candle are “inside” the first candle.

·         The formation generally requires a follow through confirmation candle.

·         The formation is more powerful when both of the candles are longer as opposed to shorter.

·         The second candle can dictate the strength of the reversal of the formation by closing higher up into the first candle’s trading range.

·         The formation is more credible if associated with higher than normal volume.

·         The Bearish Harami is a two session candlestick pattern.

·         The first session is a long white candle at the top of an uptrend.

·         The second candle gaps down from the prior session’s close and trades down forming a dark candle with the close higher than the prior candle’s open.

·         Western technical analysts refer to this pattern as an “Inside Day” because the price action of the second session is totally inside of the prior candle.

·         This pattern needs confirmation with a bearish follow through candle the next session.

·         Large candles bode for a more convincing reversal signal.

·         A close toward the bottom of the first candle is also a more compelling pattern.

·         Increased volume confirms that profit taking is underway and the bears are in control.

·         The Hammer candlestick is a single session candle and is characterized by a small real body that closes in the upper 1/3 to 1/4 or the trading range of the session.

·         The shadow of the pattern should be at least twice the size of the real body and there should ideally by no upper shadow.

·         The candle is found at the bottom of a bearish trend and is more powerful if confirmed with other support.

·         The color of the real body is not critical, although a white body is somewhat more bullish.

·         A hammer on large volume at the bottom of a trend may be considered a capitulation day.

·         The reversal is much more likely when the shadow is relatively long as compared to the real body of the candle.

·         A gap down into the hammer and then a gap up, trade up on the follow through day is a very strong reversal signal.

·         The classic hammer indicates a change in trader sentiment because at one point during the trading session the candle was long and dark representing massive bearishness.  However, before the end of the day the bulls had pushed the stock back up to the top of the trading range on volume.

·         Bears should begin to question the continued downtrend and when the stock follows through to the upside the next day it becomes confirmation that the trend has reversed.

·         The Bullish Engulfing Pattern is a bullish reversal pattern and is considered a major candlestick formation.

·         The pattern is most effective when found at the bottom of a downtrend.

·         The pattern represents a change in investor sentiment and is characterized by an initial gap down from the prior trading day.

·         The stock will not follow through with the initial gap and will begin to trade up on increased volume.

·         The mature pattern will end the session with a close above the prior session’s open, thus engulfing the prior session’s real body.

·         The pattern is considered stronger when the stock trades up from a larger gap down and if it not only engulfs the real body but the entire trading range of the prior session.

·         Sometimes you will see a situation when the Bullish Engulfing Pattern wraps around and engulfs several prior sessions and that is a very convincing reversal scenario.

·         The Pattern is additionally effective when combined with a pre-defined level of support as represented by chart patterns, major moving averages, Fibonacci levels and trend lines.

·         Oscillators such as Stochastics or RSI can also confirm a changing sentiment from being oversold to becoming more bullish.

·         Stocks will typically channel 65-70% of the time.

·         There are essentially three types of channels; Ascending, Descending and Sideways.

·         The channel is comprised of two parallel trend lines which define support and resistance.

·         The trading opportunity is as a result of buying the bounce off the lower trend line and selling the resistance.

·         Channeling stocks as a continuation pattern occur as the stock trends and then consolidates for a period of time, only to eventually break out to resume the prior trend.

·         Ascending Channels are usually embedded in a broader downtrend and act as a respite to the primary downtrend.

·         Accordingly, Descending Channels are a respite in a broader uptrend and will more often than not resume the initial bullish trend after channeling.

·         Sideways Channels are considered consolidations before resuming the original trend.

·         The investment community recognizes that stocks neither go directly up nor down without pause.

·         A majority of trading activity resides in channels as supply and demand play “tug of war”.

·         Eventually traders will push the stock out of the range.

·         The quality of the breakout/breakdown move should be measured by the investor participation as evidenced by increased volume.

·         The opportunity to make money with channeling stocks are as a result of two approaches: 1) buy on the bounce off of the lower trend line and sell at the top of the channel at resistance and 2) Play the breakout/breakdown out of the channel.

·         The Symmetrical Triangle is a continuation pattern that is comprised of two symmetrically converging trend lines.  The continuation will normally be in the direction of the prior trend, although at times the pattern can reverse the trend.

·         The breakout usually occurs prior to the triangle reaching its apex and is strongest if that is the case.

·         The target is the trend line breakout/breakdown plus the length of the widest part of the triangle.

·         After the stock has moved either up or down relatively quickly and with increased volume, the stock then begins a period of pause as the stock moves sideways or with a slight retrace against the trend.

·         The initial trading in the period of pause consists of a wider amplitude and narrows as the upper and lower trend lines converge symmetrically.

·         The investment community is telling us that it is indecisive as to the continuing direction of the stock as the trading range narrows and finally breaks out to resume the trend.

·         The Cup & Handle is a bullish continuation pattern that starts with the stock pulling back after a bullish trend and forming a rounded bottom that resembles a cup.  It then ascends to form the backside of the cup and consolidates into a flag or handle.  The handle should ideally form at the level of the beginning of the downtrend on the front side of the cup but it is still a valid pattern even if the back lip of handle of the cup forms lower than the front lip.

·         The entry point is the high of the handle and the upside potential is usually measured by the depth of the cup added to the breakout point.

·         After pulling back and trading in a relatively tight pattern and forming a rounded bottom and then ascending to the consolidation handle, profit taking begins to appear as the stock flattens on deceasing volume.

·         The continuation of the bullish move occurs when the stock breaks above the high of the handle with increasing volume.

·         An astute trader will realize that the bearishness is temporary and the breakout represents the investment communities’ continuing participation in the longer term upside move.