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Table 1 : Candlestick formations
sense of indecision between buyers and sellers . By analysing the Doji in conjunction with other candlestick formations , a reversal of the current trend can be indicated . Table 1 . iii . is a graphic representation of a Doji .
SOURCE : COMPILED BY THE AUTHOR . b ) Bullish / Bearish Engulfing The Engulfing formation is formed when the trading activity of the second candlestick in the formation exceed the trading activity of the first candlestick . Should a bullish candlestick be followed by a bearish candlestick at the end of an upward trend , a possible trend reversal can be expected . The formation is then referred to as a Bearish Engulfing candlestick formation . Additionally , a Bullish Engulfing candlestick formation is formed by a bearish candlestick followed by a bullish candlestick at the end of a downward trend , which also indicate a possible trend reversal . Both the Bullish and Bearish Engulfing candlestick formations are represented graphically in Table1 . iv . and Table1 . v . respectively .
c ) Hammer / Inverted Hammer The Hammer candlestick formation is definitely one of the more familiar formations in financial markets . The formation is characterised by significantly lower prices during the trading session , but the price closes close to the high and opening price . Should the Hammer formation form at the end of a downward trend , it indicates a possible trend reversal . The Inverted Hammer also forms at the end of a downward trend , with the difference that prices trade at a fairly high level but close reasonably close to the low and opening prices for the trading session . The formation indicates a possible change in the current trend . Please note that both the Hammer and Inverted Hammer formations indicate a stronger trend reversal should the formation make a price gap 1 . Both the Hammer and Inverted Hammer are graphically illustrated in Tabel1 . vi . and Tabel1 . vii . respectively .
d ) Hanging Man The Hanging Man formation is similar to the Hammer formation , with the difference that the Hanging Man indicates a possible trend reversal in an upward trend . The formation is formed by prices moving significantly lower from the opening price , but close very close to the highest level for the day . Confirmation is usually expected in the following trading session , followed by a bearish candlestick . The Hanging Man formation is graphically represented in Table1 . viii .
e ) Stars i . Shooting Star The Shooting Star is similar to the Inverted Hammer , with the difference that the candlestick
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A price gap occurs when the opening price differs materially from the closing price of the previous day , thereby forming a gap between the two trading sessions .
SENWES Scenario • OCT / NOV 2016 39