CHAPTER 6
Candlesticks and Gaps

ANSWER 6.1   Y Dark Cloud Cover with Exhaustion Gaps

images
  1. Circle 1, classic dark cloud cover, which closed below the prior midpoint.
  2. Gaps identified by arrows. Both are exhaustion gaps, before a high, then a low.
  3. Bearish engulfing line, circle 2.
  4. Harami Line and Stars, circles 3 and 4, are neither completed nor confirmed. There would have needed to be a close above each pattern's down bars to confirm.

ANSWER 6.2   CI Candlestick Chart with Gaps

images
  1. Circle 1 is a failed Evening Star setup. Circle 2 is a failed Harami Star.
  2. Gap labeled 3 is a breakaway gap, confirming that a new trend is likely in the current direction, and 4 is an exhaustion gap, meaning that the current trend is likely ending.
  3. The pattern at the bottom of the market to the right, circle 5, is a bullish hammer.

ANSWER 6.3   BA with Candlestick Patterns

images
  1. Bullish Harami Line and Star, completed, not confirmed.
  2. Bearish Harami Line and Star, completed, not confirmed.
  3. Bullish Morning Star Setup, nonstandard as it's a setup only. Neither completed nor confirmed.
  4. Bullish Piercing Pattern, completed and confirmed, but nonstandard as completion did not take place with the piercing pattern.

ANSWER 6.4   AAL with Candlestick Patterns

  1. Bullish Harami Line and Star.
  2. Bearish Hanging Man.
  3. Bullish Harami Line and Star.
  4. Bearish Harami Line and Star.
  5. Bullish Hammer.
  6. Bearish Evening Star setup. Although confirmed, the bearish large down bar that would be expected as the third bar in the pattern, does not take place.
  7. Bullish Harami Line and Star, preceded by an exhaustion gap. Note a bullish engulfing line follows that acts as a piercing pattern relative to the first bearish down bar of the Harami Line and Star.
  8. Bearish Harami Line and Star. Completed but not confirmed.
  9. Bullish Piercing Pattern
  10. Bearish Harami Line and Star. Not ideal pattern because Harami Line is a bit small. A couple of bars later, there's a delayed breakaway gap. One might have labeled this as a mid-point gap, but it's been exceeded.
  11. Technically, one could say this does not conform to any standard pattern. Or it could be named a nonstandard piercing pattern, as it only penetrates to a small degree into the prior bar. It's important though because it made a much lower low and closed within the previous candlestick's body. (See key reversal bars, Section 8.) Breakaway gap follows.

ANSWER 6.5   JNJ with Midpoint Gap

images
  1. The midpoint gap is labeled 1, and projects upward to the blue horizontal line.
  2. Bearish Harami Line and Star neither completed nor confirmed.
  3. Bearish Evening Star completed but did not confirm.
  4. Bearish Harami Line and Star. Confirmation point is the open of up bar, red horizontal line.
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