KEY TAKEAWAYS
- The taking pictures star sample signifies a short-term rotation from accumulation to distribution.
- The bearish engulfing sample suggests sellers have taken management, suggesting additional weak spot.
- The night star sample is a three-candle formation that illustrates an exhaustion of shopping for energy.
There is no such thing as a denying that the broad markets stay in a resilient uptrend off the April 2025 low. But when there’s one factor I’ve realized from a few years of analyzing charts, it is to stay vigilant throughout bullish phases. Despite the fact that I am going to assume the uptrend remains to be intact, that does not imply I can cease in search of indicators of potential weak spot!
With that in thoughts, listed below are three bearish candle patterns that usually pop up throughout bullish market phases. By in search of these patterns within the shares and ETFs that you simply personal, you possibly can hopefully get forward of any corrective strikes and take earnings earlier than it is too late!
The Capturing Star Sample
In case you see a protracted higher shadow, little to no decrease shadow, and the open and shut are shut collectively close to the underside of the day’s vary, then you might have recognized a taking pictures star candle sample. In case you’re aware of thehammer candle sample, then you possibly can consider this as a hammer candle however principally every little thing is the other way up!
The chart of AT&T (T) has featured various taking pictures star candles to date in 2025. Simply earlier than the selloff in early April, there was a transparent taking pictures star candle after the March rally. Then through the rally off the April low, a taking pictures star sample in early Might instructed that the uptrend part was nearing an exhaustion level.
The Bearish Engulfing Sample
One of the crucial recognizable patterns within the candlestick library, the bearish engulfing samplerepresents a short-term rotation from accumulation to distribution. Principally, a big up candle is adopted by a big down candle, and the second day’s “actual physique” (the open-to-close vary) engulfs the vary of the primary day’s actual physique.
Take a look at the power within the uptrend for Paramount World (PARA) going into early June. Then simply earlier than the 4th of July weekend, a bearish engulfing sample suggests a change of character because the bears take management. It is value noting that these candle patterns usually are not long-term alerts, however fairly point out short-term dynamics. So a bearish engulfing sample suggests weak spot for the subsequent one to 3 bars.
The Night Star Sample
In case you took the bearish engulfing sample, after which added one other small candle in the course of these two days, you then’d have an night star sample. Now most candlestick textbooks will let you know that the “star” day within the center ought to embody a niche, so there isn’t any overlap between that day’s vary and the opposite two candles. In observe, I’ve discovered most individuals ignore this element and fairly search for patterns with sufficient similarities to this fundamental construction.
Going again to the AT&T chart we used earlier, we will see a night star sample on the finish of June. A giant day is adopted quickly after by a giant down day, with a small candle within the center. It is a nice instance of the place extra weak spot led the worth under the 50-day shifting common, serving to substantiate the bearish outlook as represented by the night star sample.
It is really easy to turn out to be complacent throughout an prolonged bull market rally. Traders that frequently scan for bearish candle patterns have an edge, as they’ll anticipate potential turning factors earlier than the uptrend adjustments in dramatic style to a brand new downtrend part!
RR#6,
Dave
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David Keller, CMT
President and Chief Strategist
Sierra Alpha Analysis LLC
https://www.youtube.com/c/MarketMisbehavior
Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and methods ought to by no means be used with out first assessing your individual private and monetary state of affairs, or with out consulting a monetary skilled.
The creator doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the creator and don’t in any means symbolize the views or opinions of every other individual or entity.
About The Writer:
David is President and Chief Strategist at Sierra Alpha Analysis LLC, the place he helps lively buyers make higher selections utilizing behavioral finance and technical evaluation. He’s a former President of the CMT Affiliation.
