All About Multiple Candlestick Patterns

In the earlier chapter, we explored how a single candlestick pattern can signal a possible trend reversal. Now, let’s advance further by understanding two-candle and three-candle reversal patterns, which provide more nuanced signals. Among the most well-known are Bullish and Bearish Engulfing, Harami, Dark Cloud Cover, Piercing Pattern, and Tweezer Top & Bottom. We'll also examine powerful three-candle patterns like Morning Star, Evening Star, Doji Stars, Abandoned Baby, and Shooting Star/Inverted Hammer. 

Two-Candle Reversal Patterns 

Bullish & Bearish Engulfing 

The engulfing pattern consists of two candles of opposite color. It is a major signal of a trend reversal. 

• A Bullish Engulfing occurs during a downtrend. The body of a positive (green) candle completely engulfs the body of the previous negative (red) candle. This suggests that bullish momentum is overtaking bearish sentiment. 

• A Bearish Engulfing forms during an uptrend. A large red candle engulfs the body of a smaller green candle, indicating that bears are regaining control. 

To enhance reliability: 

• The trend before the pattern should be clearly established, even if short 

• Volume on the engulfing candle adds credibility 

• Engulfing more than one previous candle strengthens the signal 

• A larger engulfing candle after a small-bodied candle is considered a stronger move 

Bullish & Bearish Harami 

In Japanese, Harami means "pregnant", and this pattern looks just like that: a small-bodied candle within the real body of the previous long candle. 

• In an uptrend, if a small candle is enclosed by a prior long green candle, it may be a bearish reversal (Bearish Harami). 

• In a downtrend, if a small candle is inside the body of a long red candle, it signals a potential bullish reversal (Bullish Harami). 

A Harami Cross is a variation of this pattern, where the small candle is a Doji. This pattern is more powerful than the regular Harami and indicates strong indecision and a potential turning point. 

Dark Cloud Cover 

This bearish reversal pattern forms at the top of an uptrend. 

• The first candle is a strong bullish one. 

• The second candle opens above the high of the first but then closes deep into its real body. 

Key triggers for confirmation: 

• The gap-up followed by a sharp sell-off increases the probability of reversal 

• If it appears near a resistance level with volume, it indicates longs are trapped and a pullback is likely 

Piercing Pattern 

The opposite of the Dark Cloud Cover, the Piercing Pattern forms after a downtrend. 

• The first candle is long and bearish 

• The second candle opens lower but closes above the midpoint of the previous candle’s body 

This pattern indicates that bulls have stepped in with strength, reversing the downtrend. The deeper the bullish candle pierces, the higher the reversal probability. 

Tweezer Tops & Bottoms 

Tweezers consist of two candles where either the highs or lows match exactly. 

• In an uptrend, identical highs form a Tweezer Top 

• In a downtrend, identical lows form a Tweezer Bottom 

Tweezers can consist of real bodies, shadows, or even Doji combinations. The second candle doesn’t need to immediately follow the first. Weekly or monthly tweezers with confirmation candles often carry a high reversal probability. 

Three-Candle Reversal Patterns 

Star Patterns 

Stars are three-candle patterns that indicate a strong shift in market sentiment. They consist of: 

• A long real body (trend candle) 

• A small-bodied star that gaps away 

• A third candle that closes within the body of the first 

The color of the star doesn’t matter. It qualifies as a star if it does not overlap the first candle's real body. 

Morning & Evening Stars 

• Morning Star appears after a downtrend and signals a bullish reversal: 

• First: Long bearish candle 

• Second: Small-bodied star gapping down 

• Third: Strong bullish candle closing within the first candle’s body 

• Evening Star appears after an uptrend and signals a bearish reversal: 

• First: Long bullish candle 

• Second: Star gapping up 

• Third: Long bearish candle closing deep into the first candle 

These patterns reflect a clear momentum shift from one side to the other. 

Morning & Evening Doji Stars 

This is a more powerful variant where the middle candle is a Doji: 

• Morning Doji Star: Appears after a downtrend, signaling bottom formation 

• Evening Doji Star: Appears after an uptrend, hinting at a top 

Confirmation is key here: 

• If a Doji star is followed by a gap-up bullish candle after a downtrend, it confirms the reversal 

• If a Doji star is followed by another bullish candle in an uptrend, the pattern may become invalid 

Abandoned Baby 

An Abandoned Baby is a rare but high-probability reversal signal involving a gap-separated Doji: 

• In an uptrend: A Doji gaps up after a bullish candle, followed by a gap-down bearish candle 

• In a downtrend: A Doji gaps down after a bearish candle, followed by a gap-up bullish candle 

This distinct formation, with non-overlapping candles, often leads to strong reversals. 

Shooting Star & Inverted Hammer 

• Shooting Star appears at the top of an uptrend: 

• Small real body near the bottom of the candle 

• Long upper shadow 

• Indicates failed bullish momentum and potential reversal 

• Inverted Hammer appears during a downtrend: 

• Looks like a shooting star but appears at the bottom 

• Needs confirmation with a bullish candle the next day to trap shorts and trigger buying 

Points to Remember 

• Multi-candlestick patterns offer deeper insight into market reversals or continuations 

• Always wait for confirmation, especially with three-candle patterns 

• These setups are stronger when they occur near support/resistance zones or with volume spikes 

• Platforms like m.Stock provide real-time candlestick charting tools to help identify these patterns efficiently