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Crypto TA Tips - Bullish Candlesticks and Patterns

09/05/2018 12:00

The following are some samples from Big Cheds six-part series on Bullish & Bearish trading signals and patterns. 

 

Dragonfly Doji

Dragonfly doji is a reversal candle that often appears at the end of a downtrend, with a long lower shadow and small to no real candle body. This is the opposite of the bearish pattern, gravestone doji.

In this candle the bears were in full control and flushed the price down, but bulls fought back, rejecting lower prices and pushing all the way back to the opening price, leaving that nice lower shadow(wick).

In this example below, $BTC Bitcon on a 1 hour chart has made a nice run and is pulling back. After some pressure from bears, bulls are able to rally and hold the middle BB, eventually forming that nice dragonfly doji as bulls regained control.



Confirmation of this signal would be a candle close above the high of day for the dragonfly, and though it is better to have a shaved top (no upper wick), a small one is okay. A stop loss would be the low of the tail of the shadow.

Tweezer Bottom

Tweezer bottom is a reversal pattern formed with two or more candles with the same low or almost exactly the same low of day. Those candle real bodies do not need to be the exact same size as in the image below, as long as the candle wicks have approximately the same low. This pattern has more significance when the second candle gives us an additional signal, such as a bullish harami.

In this example below for $IOTA we can see how the bears were in full control until selling dried up. Then the bulls were able to put together a tweezer bottom with a bullish engulfing signal candle.

 

(A best practice, if you wish to trade Tweezer bottoms, is to set your stop loss at the lowest point of the second candle. )

 

Downtrend Break

A key sign that bears are losing control and bulls are starting to take the initiative is a clean break of a long-term downtrend. Standard practice dictates that there should be at least three points of contact to establish a trend. 

 

 

Best practice is to wait for a 3% move over the trend line to confirm the breakout. 

Sometimes when the price does break a downtrend you will also see what is called a back-test, where the price will re-test that line of prior resistance (now support) before moving back up. In general this should signal a confirmation of a downtrend break, after a successful trend-line backtest. 

In this example below we can see $XVG has broken through that upper trend line resistance, and on a pullback was able to rally when back-testing that resistance line.

 

 

On this back test, in theory you could have started to scale in on the initial break out, and then with a successful back-test that would be a logical spot to continue to scale in and add to your position.

 

Thank you for taking the time to visit Bitcoin Live and reading a sample of Big Cheds Bullish signals & patterns. We appreciate your interest in becoming an excellent cryptocurrency trader and would like to enhance your skills & knowledge.  You are encouraged to sign up for a membership with Bitcoin Live where you will gain access to a team of over six mentors with a variety of skills and over 100 years of trading experience. Click below and your education will begin.

 

 


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