Rising or Falling 3

Falling 3 (bullish) and Rising 3 (bearish) sample is drawn

These patterns are comprised of five candlesticks; a long real body candlestick preceded three small bearish real bodies which hold within the first session’s – which is also a long body candle-range. So there are two long body candles interspersed by three small body candles. The direction of the small body candle decides the pattern. The subsequent move is opposite to the direction of the small body candles. The final candle must be long and should close in the opposite direction to small body candles. The color of the small candle is not important.

The above patterns encompass more or less the main candlestick patterns. There are many other minor patterns also and more are being indentified. Most of the commercially available software’s manage to do a good job of indentifying the patterns thus making the job of the analyst easier. The following chart shows three major patterns on the Sensex chart. Right near the top of the last up move, the market reversed with a Bearish engulfing pattern, then followed this up with an Evening Star which led to a sharper decline. This moved ended with a bullish engulfing pattern which produced a minor rally.