OKEx Paper Trading
Academy Trading Ideas Article

Zero basic to learn analysis of Bitcoin | 4-Bearish Candlestick Patterns

2019.11.08 limin.zhang
By OKEx

There is a trend of rising and falling, reading the price language;

There is a signal to buy and sell, and bid farewell to feeling the deal.

Today, we’re going to learn about the Bearish Candlestick Patterns.

The appearance of the evening star indicates that the bull trend has come to an end and an adjustment is coming.Let’sstart with the Evening Star.

What is an Evening Star? As shown in the red line.

The evening star is a bearish candlestick pattern which consist of three candles: a large white candlestick, a small-bodied candle, and a red candle. An evening star demonstrates a unique characteristic: the closing price of the last candle must be lower than the first candle for at least 50%.

We can even determine the bearish level of the market by looking at the closing price of the last candle. As you can see in the chart, the red candle’s closing price has just exceeded the 50% level. This indicates that the bearish trend is comparatively weak. If the red candle’s closing price is close to or the same as the white candle’s opening price, it means that the bearish trend is comparatively strong;the red candle’s closing price is significantly lower than the white candle’s opening price, it means that the bearish trend is very strong.

In everyday trading markets, an evening star may not be so obvious as you can recognize from text books. Here are some examples we found in the past:

In the first figure, you can see the middle section is formed by two small candlesticks. Let’s move them back to the real-life trading chart. After a strong price surge, an evening star is seen at the high level, then we immediately see a price correction pattern.

The second figure is taken from OKEx – a 2hr BTC/USD chart. This may not be a perfect example as the middle candle is not significantly small. However, we can still see an evening star pattern and the price falls immediately after the pattern is formed.

In the third figure, two small-bodied candles formed the middle section.  We can also see that the red candle’s closing price is significantly lower than the white candle’s opening price. The price tumbles after continuous oscillations.Sometimes, the evening star may appear multiple times in a short time. In this BTC/USDT bearish trend, we see two evening stars when the price rallies back up, and falls immediately after.

The second one we will learn about is Bearish Engulfing.

A bearish engulfing pattern consists of a white candlestick followed by a large red candlestick that “engulfs” the smaller white candle.

But how can we determine the bearish level if we see such pattern?

In the first figure, the red candle barely engulfs the white candle, meaning the bearish trend is weak. In the second figure, the red candle’s closing price is significantly lower than the white candle’s opening price, the length of the red candle is almost twice of the white candle, meaning that the bearish trend is strong. In the third figure, the red candle engulfs multiple white candles at a time, indicating that the bearish trend is extremely strong.

Now, let’s look at some real-life examples.

As shown in the chart.

The first figure is a LTC/USDT day chart from OKEx. After a price surge, we can see a large red candle engulfing many white candles, and a strong bearish trend follows.

The second figure is an ETH/USDT 2-hour chart from OKEx. After the ETH price rallies back up to a new high, a bearish engulfing pattern is seen, and the bearish trend continues.

The third figure is an EOS/USDT 6-hour chart from OKEx. After a continuous price surge, a bearish engulfing pattern is formed, and a strong bearish trend appears.

The last one we will learn about is the Tower Top.

A tower top pattern is comprised of a normal or large white candle at the left, several small candles, usually more than 5, in the middle, and a normal or large red candle at the right. As you can see, it looks exactly like a tower top in the chart.

A tower top often forms after the closing price of the last red candle is lower than the body of the first white candle by 50%. A tower top is a reversal pattern, it indicates a reversal of the bearish trend. This reflects a gradual exhaustion of buyers before the sellers forcefully regain control.

We can also determine the bearish level of the market by looking at the closing price of the last red candle.As shown in the figure, if the red candle’s closing price barely exceeds the 50% level, the bearish trend will be comparatively weak. But if the closing price is close to the white candle’s opening price, the bearish trend will be stronger. And if the closing price is significantly lower than the white candle’s opening price, the bearish trend will be very strong.

Let’s take a look at some real-life examples.

This figure is taken from a BTC/USDT 6-hr chart at OKEx. We can see long shadows attached to the small candlesticks. But this phenomenon doesn’t affect the tower top structure, the BTC market sees a strong bearish pattern afterwards, the price falls to a new low.

The second figure shows the spot ACC/USDT 12-hr chart at OKEx. The middle section of the tower top is not formed by unusually small candles, and we can see a larger fluctuation level. After the pattern is formed, ACC price tumbles sharply.

Let’s have a review of what we learn today:

The first is an evening star, meaning that darkness is upon us. The second is the bearish engulfing, indicating a bear run coming. The last one is the tower top, reflecting the gradual exhaustion of buyers.

Here comes the end of our section, we will show you the importance of the various Candlestick Line combinations position

Exclusive Reward for Newcomers

Earn free bitcoin worth $20 by signing up & placing your first order!

Recommended

trading-ideas-en