Module 2 Technical Analysis

Chapter 8

Multiple candlestick patterns (Part 1)

614

M2-Ch8-title

8.1 – The Engulfing Pattern

In a single candlestick pattern, the trader needed just one candlestick to identify a trading opportunity. However when analyzing multiple candlestick patterns, the trader needs 2 or sometimes 3 candlesticks to identify a trading opportunity. This means the trading opportunity evolves over a minimum of 2 trading sessions.

The engulfing pattern is the first multiple candlestick pattern that we need to look into. The engulfing pattern needs 2 trading sessions to evolve. In a typical engulfing pattern, you will find a small candle on day 1 and a relatively long candle on day 2 which appears as if it engulfs the candle on day 1. If the engulfing pattern appears at the bottom of the trend, it is called the “Bullish Engulfing” pattern. If the engulfing pattern appears at the top end of the trend, it is called the “Bearish Engulfing” pattern.

8.2 – The Bullish Engulfing Pattern

The bullish engulfing pattern is a two candlestick pattern which appears at the bottom of the down trend. As the name suggests, this is a bullish pattern which prompts the trader to go long. The two day bullish engulfing pattern is encircled in the chart below. The prerequisites for the pattern are as follows:

  1. The prior trend should be a downtrend
  2. The first day of the pattern (P1) should be a red candle reconfirming the bearishness in the market
  3. The candle on the 2nd day of pattern (P2) should be a blue candle, long enough to engulf the red candle

M2Ch8-chart1

The thought process behind the bullish engulfing pattern is as follows:

  1. The market is in down trend with prices steadily moving down
  2. On the first day of the pattern (P1), the market opens low and makes a new low. This forms a red candle in the process
  3. On the second day of the pattern (P2), the stock opens near the closing prices of P1, and attempts to make a new low. However, at this low point of the day there is a sudden buying interest, which drives the prices to close higher than the previous day’s open. This price action forms a blue candle
  4. The price action on P2 also suggests that bulls made a very sudden and strong attempt to break the bearish trend and they did so quite successfully. This is evident by the long blue candle on P2
  5. The bears would not have expected the bull’s sudden action on P2 and hence the bull’s action kind of rattles the bears causing them some amount of nervousness
  6. The bullishness is expected to continue over the next few successive trading sessions, driving the prices higher and hence the trader should look for buying opportunities

The trade set up for the bullish engulfing pattern is as follows:

  1. The bullish engulfing pattern evolves over two days
  2. The suggested buy price is around the close price of blue candle i.e on P2
    • Risk taker initiates the trade on P2 itself after ensuring P2 is engulfing P1
    • The risk averse initiates the trade on the next day i.e the day after P2 around the closing price, after confirming the day is forming a blue candle
    • If the day after P2 is a red candle day, the risk averse trader will ignore the trade, owing to rule 1 of candlesticks (Buy strength and Sell weakness)
    • On a personal note, in multiple candlestick patterns where the trade evolves over 2 or more days it is worth to be a risk taker as opposed to a risk averse trader
  3. The stop loss for the trade would be at the lowest low between P1, and P2

Needless to say, once the trade has been initiated you will have to wait until the target has been hit or the stoploss has been breached. Of course, one can always trail the stop loss to lock in profits.

Have a look at DLF’s chart below; the bullish engulfing pattern is encircled.

M2Ch8-chart2

The OHLC on P1 – Open = 163, High = 168, Low = 158.5, Close = 160. On P2 the OHLC details are – Open = 159.5, High = 170.2, Low = 159, Close = 169.

The trade set up for the bullish engulfing pattern is as follows:

  1. The risk taker would go long on P2 at 169. He can do this by validating P2 as an engulfing pattern. To validate P2 as an engulfing patterns there are 2 conditions:
    • One, the current market price at 3:20PM on P2 should be higher than P1’s open.
    • Second, the open on P2 should be equal to or lower than P1’s close
  2. The risk averse will initiate the trade, the day after P2 only after ensuring that the day is a blue candle day. So if the P1 falls on a Monday, the risk averse would be initiating the trade on Wednesday, around 3:20 PM. However, as I had mentioned earlier, while trading based on multiple candlestick pattern, it may be worth initiating the trade on pattern completion day itself i.e P2
  3. The stop loss on this trade will be the lowest low between P1 and P2. In this example, lowest low falls on P1 at 158.5

In this example, both the risk averse and the risk taker would have been profitable.

Here is an example of a perfect bullish engulfing pattern formed on Cipla Ltd, the risk averse trader would have completely missed out a great trading opportunity.

M2Ch8-chart3

There is often a lot of confusion on whether the candle should engulf just the real body or the whole candle, including the lower and upper shadows. In my personal experience, as long as the real bodies are engulfed, I would be happy to classify the candle as a bullish engulfing pattern. Of course, candlestick sticklers would object to this but what really matters is how well you hone your skills in trading with a particular candlestick pattern.

So going by that thought, I’d be happy to classify the following pattern as a bullish engulfing pattern, even though the shadows are not engulfed.

M2Ch8-chart4

8.3 – The bearish engulfing pattern

The bearish engulfing pattern is a two candlestick pattern which appears at the top end of the trend, thus making it a bearish pattern. The thought process remains very similar to the bullish engulfing pattern, except one has to think about it from a shorting perspective.

Take a look at the chart below, the two candles that make up the bearish engulfing pattern is encircled. You will notice:

M2Ch8-chart5

  1. To begin with the bulls are in absolute control pushing the prices higher
  2. On P1, as expected the market moves up and makes a new high, reconfirming a bullish trend in the market
  3. On P2, as expected the market opens higher and attempts to make a new high. However at this high point selling pressure starts. This selling comes unexpected and hence tends to displace the bulls
  4. The sellers push the prices lower, so much so that the stock closes below the previous day’s (P1) open. This creates nervousness amongst the bulls
  5. The strong sell on P2 indicates that the bears may have successfully broken down the bull’s stronghold and the market may continue to witness selling pressure over the next few days
  6. The idea is to short the index or the stock in order to capitalize on the expected downward slide in prices

The trade set up would be as follows:

  1. The bearish engulfing pattern suggests a short trade
  2. The risk taker initiates the trade on the same day after validating two conditions
    • The open on P2 is higher than P1’s close
    • The current market price at 3:20 PM on P2 is lower than P1’s open price. If the two conditions are satisfied, then it would be logical to conclude that it is a bearish engulfing pattern
  3. The risk averse will initiate the trade on the day after P2 only after ensuring that the day is a red candle day
  4. Since the bearish engulfing pattern is a 2 day pattern, it makes sense to be a risk taker. However this purely depends on the individual’s risk appetite

Take a look at the chart below of Ambuja Cements. There are two bearish engulfing patterns formed. The first pattern on the chart (encircled, starting from left) did not work in favor of a risk taker. However the risk averse would have completely avoided taking the trade. The second bearish engulfing pattern would have been profitable for both the risk taker and the risk averse.

M2Ch8-chart6

The OHLC data for the bearing engulfing pattern (encircled at the top end of the chart) is as below:

P1: Open – 214, High – 220, Low – 213.3, Close – 218.75

P2: Open – 220, High – 221, Low – 207.3, Close – 209.4

The trade setup for the short trade, based on the bearish engulfing pattern is as follows:

  1. On P2 by 3:20 PM the risk taker would initiate the short trade at 209 after ensuring P1, and P2 together form a bearish engulfing pattern
  2. The risk averse will initiate the trade, the day after P2 only after ensuring that the day is a red candle day
  3. The stoploss in both the cases will the highest high of P1 and P2, which in this case is at 221.

Both the risk averse and the risk taker would have been profitable in this particular case.

8.4 – The presence of a doji

Now here is a very interesting chart. From my own personal experience I can tell you, charts like the one shown below are highly profitable. One should not miss such trading opportunities

Take a look at the chart, what are the things that catch your attention?

  1. An obvious uptrend as highlighted
  2. A bearish engulfing pattern right at the top end of the upward rally
  3. A doji formation on the day following P2

What implication would a doji have in this chart?

M2Ch8-chart7

Let us inspect this chart event by event:

  1. A prolonged uptrend in the chart confirms the bulls are in absolute control
  2. On P1 a blue candle is formed, reconfirming the bull’s dominance in the markets
  3. On P2 markets open higher and make a new high comforting the bulls. However at the high point a strong surge to sell builds up, to an extent that the prices closes below P1’s opening prices
  4. This trading action on P2 sets in a bit of panic to bulls, but they are not shaken yet
  5. On day 3, let us call it as P3, though the opening is weak it is not much lower compared to P2’s close. This is not too comforting for the bulls, as they expect the markets to be stronger.
  6. During P3 the market attempts to move higher (Doji’s upper shadow) however the high is not sustained. Even the low is not sustained and eventually the day closes flat forming a Doji. As you may recall, Dojis indicate indecision in the market
  7. On P2 bulls panicked and on P3 bulls were uncertain
  8. Panic with uncertainty is the perfect recipe for a catastrophe. Which explains the long red candle following the Doji

From my own personal trading experience I can tell you that whenever a doji follows a recognizable candlestick pattern, the opportunity created is bigger. Besides illustrating this point, I also want to draw your attention to chart analysis methodology. Notice in this particular chart, we did not just look at what was happening on P1 or P2 but we went beyond that and actually combined two different patterns to develop a comprehensive view on the market.

8.5 – The Piercing Pattern

The piercing pattern is very similar to the bullish engulfing pattern with a very minor variation. In a bullish engulfing pattern the P2’s blue candle engulfs P1’s red candle completely. However in a piercing pattern P2’s blue candle partially engulfs P1’s red candle, however the engulfing should be between 50% and less than 100%. You can validate this visually or calculate the same. For example if P1’s range (Open – Close) is 12 , P2’s range should be at least 6 or higher but below 12.

M2Ch8-chart8

As long as this condition is satisfied, everything else is similar to the bullish engulfing including the trade set up. Here a risk taker would initiate the trade on P2 around the close. The risk averse would initiate the trade, the day after P2 only after ensuring a blue candle is formed. The stoploss would be the low of the pattern.

Have a look at the following chart:

M2Ch8-chart9

Here P2’s blue candle engulfs just under 50% of P1’s red candle. For this reason we do not consider this as a piercing pattern.

M2Ch8-chart10

8.6 – The Dark Cloud Cover

The dark cloud cover is very similar to the bearish engulfing pattern with a minor variation. In a bearish engulfing pattern the red candle on P2 engulfs P1’s blue candle completely. However in a dark cloud cover, the red candle on P2 engulfs about 50 to 100% of P1’s blue candle. The trade set up is exactly the same as the bearish engulfing pattern. Think about the dark cloud cover as the inverse of a piercing pattern.

M2Ch8-chart11

8.7 – A perspective on selecting a trade

Typically stocks in the same sector have similar price movement. For example, think about TCS and Infosys or ICICI Bank and HDFC bank. Their price movement is similar because these companies are more or less of the same size, have similar business, and the same external factors that affect their business. However this does not mean their stock price movement would match point to point. For example if there is negative news in the banking sector, banking stocks are bound to fall. In such a scenario if the stock price of ICICI Bank falls by 2%, it is not really necessary that HDFC Bank’s stock price should also fall exactly 2%. Probably HDFC Bank stock price may fall by 1.5% or 2.5%. Hence the two stocks may form 2 different (but somewhat similar) candlestick patterns such as a bearish engulfing and dark cloud cover at the same time.

Both these are recognisable candlestick patterns but if I were to choose between the two patterns to set up a trade. I would put my money on the bearish engulfing pattern as opposed to a dark cloud cover. This is because the bearishness in a bearish engulfing pattern is more pronounced (due to the fact that it engulfs the previous day’s entire candle). On the same lines I would choose a bullish engulfing pattern over a piercing pattern.

However there is an exception to this selection criterion. Later in this module I will introduce a 6 point trading checklist. A trade should satisfy at least 3 to 4 points on this checklist for it to be considered as a qualified trade. Keeping this point in perspective, assume there is a situation where the ICICI Bank stock forms a piercing pattern and the HDFC Bank stock forms a bullish engulfing pattern. Naturally one would be tempted to trade the bullish engulfing pattern, however if the HDFC Bank stock satisfies 3 checklist points, and ICICI Bank stock satisfies 4 checklist points, I would go ahead with the ICICI Bank stock even though it forms a less convincing candlestick pattern.

On the other hand, if both the stocks satisfy 4 checklist points I will go ahead with the HDFC Bank trade.


Key takeaways from this chapter

  1. Multiple candlestick patterns evolve over two or more trading days
  2. The bullish engulfing pattern evolves over two trading days. It appears at the bottom end of downtrend. Day one is called P1 and day 2 is called P2
  3. In a bullish engulfing pattern, P1 is a red candle, and P2 is a blue candle. P2’s blue candle completely engulfs P1;s red candle
  4. A risk taker initiates a long trade at the close of P2 after ensuring P1 and P2 together form a bullish engulfing pattern. A risk averse trader will initiate the trade the day after P2, near the close of the day
  5. The stoploss for the bullish engulfing pattern is the lowest low between P1 and P2
  6. The bearish engulfing pattern appears at the top end of an uptrend. P1’s blue candle is completely engulfed by P2’s red candle
  7. A risk taker initiates a short trade at the close of P2 after ensuring P1 and P2 together form a bearish engulfing pattern. The risk averse trader will initiate the trade the day after P2, after confirming the day forms a red candle
  8. The highest high of P1 and P2 forms the stoploss for a bearish engulfing pattern
  9. The presence of a doji after an engulfing pattern tends to catalyze the pattern’s evolution.
  10. The piercing pattern works very similar to bullish engulfing pattern, except that P2’s blue candle engulfs at least 50% and below 100% of P1’s red candle
  11. The dark cloud cover works similar to the bearish engulfing pattern, except that P2’s red candle engulfs at least 50% and below 100% of P1’s blue candle.

614 comments

  1. kashish shambhwani says:

    brain storming session..new things for me 🙂

  2. jagadeesh says:

    Hello sir,
    Can i call the circled one as a bullish engulfing pattern???

  3. Nitesh sharma says:

    Hi Karthik
    Can the Candlestick of axis bank be considered as Bullish engulfing on the daily chart .

  4. Nitesh sharma says:

    Hi Karthik
    am i Right in Saying that in the Below Coalindia 3 Month Chart we have 2 Bearish Engulfing and 1 Bullish engulfing .

  5. Amitvikram says:

    Thanks for the contents Karthik, it is wonderfull. Given that there are 1000’s of listed stocks. How do we go about looking into these patterns in these stocks. Is it practically possible to scan each one of the stocks for these patterns?

  6. Nitesh sharma says:

    Hi Karthik

    Can this Multiple candlestick be used in intraday also or they can be used only in 2 or 3 days basis as saw for Morning and evening star its mentioned for 3 days , means 3 candles for 3 days ?

  7. Durgesh kumar says:

    Sir, which candlestick pattern is more convincing downtrend or uptrend assumption.

  8. AastroGuru says:

    Nice article Karthik!
    So far so good! Thanks!

  9. vishvendra89 says:

    here p1 high=168 is less than p2 close =169 but p1 high is above p2 close in graph, also the lower shadow on p2 candle is missing.

  10. manickame says:

    Thank you verymuch Mr Karthi Rangappa . My Hearty Wishes for a happy and prosperous NEW YEAR to You and Your Family.
    Regards
    V.Manikame
    Pondicherry.

  11. Jay says:

    Hi Karthik, Thank you for clearing yesterday’s query in previous chapter.

    You have clearly explained about the stop loss limit that we need to put while following these patterns… what about the target… Could you please advise? Thank you.

  12. DJ9425 says:

    Dear Karthik Sir, today found presence of doji followed bearish engulf(chapter 8.4) in ASHOKLEY ,
    many many thanks for your valuable support.

  13. Ali says:

    Hi Karthik,

    First of all, I thank you for this wonderful initiative . Is this a bearish engulfing pattern with presence of a doji?

  14. BNS says:

    Dear Sir,

    This is great and information is pretty much insightful. I was following Technical Analysis textbook, but what it lacks is real market experiences. Thank you for this.

    And I have a query:
    Given the range bound in intraday trading and using these technicalities, we have to do multiple trades. Don’t you think making these many trades will be taken away by brokerage charges and other expenses. As a retail investor, can I have some suggestions?

    Thank you.

    • Karthik Rangappa says:

      Yes, in a range bound market trades can get a bit choppy. So one has to be quick to realize this. Also, if you are actively day trading then you have to ensure your costs are low. Make sure you are with a broker who not only charges you less broker but also less transaction charge.

    • SaikiranGarapati says:

      Hi BNS,

      Can you tell me Which Technical Text book you have?

  15. SaikiranGarapati says:

    Hi Karthik Sir,

    As you said, any pattern with doji formation will create a great opportunity,Please have a look on the attached chart and let me know my identification (Bullish Engulfing Pattern along with Doji on P3) is correct or not and also tell me what i need to follow if i want to take a long position on the same?

    Regards,
    SaikiranGarapati,
    08148860968

    • Karthik Rangappa says:

      Yes, I agree..but you should have initiated a long trade on the day of the doji formation. The chart pattern looks attractive though. Good luck.
      Also please note – as per SEBI rules, I cannot advice on trade positions 🙂

      • Ganesh says:

        Seriously, one cannot advice on trading positions as per SEBI guidelines!?
        Then how do the people on business news channels advise the people to buy or sell some specific stocks!?

        • Karthik Rangappa says:

          To that you need to be registered as an Investment Adviser or a Research Analyst. I suppose they have the required registration.

      • romi says:

        Hi Karthik,

        Thanks in advance for your help and for these wonderful set of explanations.
        also, because of your detailed level answering, learning has been on an additional pace.
        So, I was checking on the TVS scrip after the doji formation and found that prices fell for next few sessions. Is it because the close of P2 and open of P3 had significant difference. If yes, is there a range?

        • Karthik Rangappa says:

          Romi – It could be attributed to that. Also do remember there is a fundamental angle here – TVS is a Chennai based company and unfortunately because of the floods in Chennai both sales and production have taken a hit.

          • romi says:

            thanks Karthik.
            The data I referred was actually for Mar’15 and Apr’15 but still I guess the angle u pointed out is also an important one for considering the trades in future. 🙂

      • romi says:

        Hi Karthik,

        Thanks in advance for such initiative. also, with these Q&As, learning has been on an additional pace.
        My query is on the above chart where a doji is formed. when I checked the historical prices, there was a fall for a few sessions post the pattern formation. Was it because the P3(Open) and P2(Close) had reasonable difference? If yes, what is the range?

    • Kal says:

      Do you want me to tell you why your trade wasn’t worked out ?
      Thanks…

  16. SaikiranGarapati says:

    Thanks for the Reply and for your support.

  17. M ANANTHA RAMAN says:

    Dear Kartik
    which pattern is this is a hammer or piercing pattern?

    • Karthik Rangappa says:

      It is not a piercing pattern as piercing pattern requires –

      1) Alternate candles – Day 1 to be a black candle (bearish) and day 2 to be a white (bullish) candles
      2) The bullish candle should recover at least 50% of the previous days losses

      Both these conditions do not match, hence not a piercing pattern.

      It looks more like a hammer – but then it would have been so much better if the opening of the pattern day was lower than the previous days low. However with some amount of flexibility you can consider this as a hammer.

      • Tejas says:

        Sir,Thanks for this wonderful series.
        With regards to the above ,I feel it does not look like a hammer considering that the length of the wick is not even twice of the length of the body! Am I missing something?

  18. Purvesh says:

    Dear Kartik
    which pattern is this is a bullish engulf?
    1 candle : O-149.80 H- 149.90 L-143.50 Close -144.40
    2 O-144 H- 152.70 L-143 Close -151.90

  19. Rishi Sekhri says:

    Sir,
    What is the 6 point trading checklist a trade should satisfy (at least 3 to 4 points out of 6) for it to be considered as a qualified trade. plz reply.

  20. Rishi Sekhri says:

    Ok,thanx a lot sir

  21. Rajesh Rao says:

    Hi Karthik,

    On the below chart for AuroPharma there was perfect bearish engulfing happened. Also you can see there was spinning top on third day, yet the stock has not fallen. What should i do when such situation arises.

    • Karthik Rangappa says:

      Hi Rajesh, few thoughts on this trade –

      1) Yes the stock has formed a good bearish engulfing pattern

      2) The volumes seems to be good as well

      3) The 3rd day spinning top looks encouraging

      4) The last two green candles are on low volumes, which is again encouraging

      5) The trade is still valid assuming you have initiated the trade after spotting the bearish engulfing pattern

      If I were you I would hold on to it as the stoploss is still in tact (1375 as SL). Rememebr after initiating the trade you have to exit only when your SL is triggered or target is achieved…so just wait for the trade to evolve. According to me everything seems to be ok here. However, in case the trade goes against you, be prepared to cut your losses ard 1375. Good luck.

      • amateur says:

        Hi Karthik,
        you suggest to hold on to the trade. But since its a short, it would be squared off at the end of the day right? so, hewould be getting loss at the end of first candle., and cant do anything. Please correct me if i am wrong.

      • chirag says:

        hi sir actually ididnt get the point 3,point 4 why r u saying that is encouraging?

    • krishn says:

      Sir,
      Your chart is very fine as compare to other service provider.Please tell me about this.Thanks

  22. Pongurusamy - +91-9444132129 says:

    Thanks for your support
    almost my 75% investment i lost. After reading this i started with Engulfing pattern in commodities
    Its working good when i did paper trad now i got the hope i can recover my losses
    once again thanking you Karthick for your support

  23. Pongurusamy says:

    I did real trade also in Crude oil its giving good profit.
    Thanks. Please remove my mobile no from my previous comment

  24. Kartikey says:

    Consider a Red candle with a prior downtrend,Now the next day a Blue candle appears which opens above the close of the red candle and closes above the high of the previous red candle with good volumes.Doesn’t this blue candle shows strength of bulls throughout the day and warrants a long trade.I see this pattern a lot and more often than not it is successful.Thanks

    • Karthik Rangappa says:

      This appears to be ‘almost’ like a bullish engulfing pattern, it certain seems to show strength. Although there is no name for this pattern (or at least I dont know) you can still treat this as it is a recognizable candlestick pattern (as you have tracked it over and over again). Please make sure other checklist items comply before you initiate the trade. Good luck.

  25. Rishi Sekhri says:

    Can someone suggest me Real Time Intraday Commodity Charts provider???

  26. Rishi Sekhri says:

    Which provider is the right one to provide metastock platform???

  27. Rishi Sekhri says:

    Can someone suggest me which provider is the right one to provide metastock platform???

  28. girish says:

    dear karthik sir…
    How are you..?
    I’m rocking in market karthik sir… Here I’m sending bearish engulfing pattern…..
    I’m really feeling fantastic karthik sir…I’m funning with indicators, ta is increasing my knowledge in market…
    with all my heart thank you karthik ji….very useful ta study material.

  29. Kashyap says:

    Hi Karthik

    Really find this website interesting. I know learning TA and mastering it is not easy, but slowly getting there. Thanks for the material.

    Karthik, could you please refer to the TCS chart here and confirm if it is a bullish engulfing?? I have my doubts because of the prior trend but would love a confirmation from you 🙂

    Thanks

  30. kgmkishor says:

    Hi karthik.
    If I’m going short on day’s end. Say 3:20pm. Will it get squared off by 3:30.
    I’ve been told that shorting is only possible in intra day trade and not in delivery ones.
    Is that right?

  31. madhu nair says:

    Karthik, can the last candle be classified as a piercing pattern? it seems to be withing the support zone. is the volume substantial? the RSI is reversing from the oversold line too. compelling to go long?

  32. pshetty says:

    Hi Karthik, I really appreciate your work and knowledge and most importantly yours sharing those knowledge to others :-).
    My query is of today’s DLF chart and want to confirm if the below DLF chart shows Bullish Engulfing or is there anything more to confirm the same. If its indeed bullish sign, so can i say it will atleast touch 150 in week or 2?
    Thanks

  33. madhu nair says:

    Karhik, a bullish harami formed with strong volume near the support, RSI at oversold. Though the stock opened with a gap up the next day, it was a doji. followed by a bearish candle with low volume today. what do you make of it? how does one trade this?

    • Karthik Rangappa says:

      I would be inclined to go long but since the markets are a bit weak I would not be comfortable trading futures or spot. I would instead trade slightly OTM call option here.

      • Vivek says:

        Hi Karthik,

        I am going through all the modules once again. Could you please justify your above statement as to if market is weak going long on call is better option. How?

        Thanks in advance

        • Karthik Rangappa says:

          Weak markets implies low premium value for call options…in case your expect a market rebound, then buying calls makes sense.

  34. Pearl says:

    What are the differences between single and multiple candlestick patterns? And which one is more reliable? And how does bullish engulfing pattern differ from hammer ? And bearish engulfing pattern from hanging man?

  35. vasanth says:

    In the chart i have highlighted the Bullish engulfing pattern. The pattern formed after the formation of 5-6 candles downtrend. But the volume of the green candle is not sufficient. While considering the bullish engulfing pattern whether the first red candle volume to be considered or the second green?

    • Karthik Rangappa says:

      The volumes should certainly be good for the 2nd green candle.

      Also, in the chart you have posted I’m not too convinced that the pattern is a bullish engulfing. My reasons –

      1) The down trend before the pattern is not really convincing
      2) The green candle should have opened below the red candle’s close and then moved to a price point higher than the red candles’s opening.

      • Vishal Saini says:

        Karthik Sir…Which Chart are you discussing as i am not finding any chart here????
        Also in many comments i saw people are discussing charts they have posted but i am not able to see any of those. Why is that????

        • Karthik Rangappa says:

          The charts are all showing up, can you please refresh your browser and check once?

          • Vishal Saini says:

            Sir i have tried everything like updating browser, tried other browsers also and finally even i switched to another device to see if problem is with my device but nothing worked for me.

            Charts which you used for explanations are visible but rest on comments are not showing up at all.I cannot even see option to upload image.

            Please Sir help me

          • Karthik Rangappa says:

            Ah, not sure Vishal. Let me check this on multiple systems here.

          • srikantheswar says:

            Hi Karthick,

            Same issue for me like Vishal Saini, I couldn’t see any images in the comment area, neither an option to add an image. Tried Chrome/Mozilla latest versions .

          • Karthik Rangappa says:

            Will get this checked soon. Thanks.

          • Apurva A Kunkulol says:

            Actually, even I am not able to see the charts posted here, by other people.
            Also could you guide as to how I can attach a chart in my query here?

            Thanks a tonne.

          • Karthik Rangappa says:

            People usually upload the pics on Gdrive and share the link here. That works.

        • Tejas says:

          Kindly click on the symbol which looks somewhat like a comma below the comment.

  36. Robin says:

    Hi Karthik,
    In a PIERCING pattern, the blue candle should be more than 50% but less than 100% of the previous red candle (it is a bullish sign)…..If the blue candle is 100% or more than 100% then it is BULLISH ENGULFING pattern. If the blue candle is less than 50% but within the red candle body, then it is a BULLISH HARAMI pattern…right?
    So, is it safe to assume that a red candle followed by a blue candle in a down trend is bullish signal…provided…the blue candle is either fully covering the red candle (BULLISH ENGULFING) or the blue candle body is within the body size of the red candle (PIERCING or BULLISH HARAMI)
    Same logic (in opposite way) for in an uptrend .
    Thanks 4 ur time.
    ROBIN.

  37. madhu nair says:

    Karthik can the second last bearish candle be treated as a failed dark cover? or do you think the side ways trend negates it?

    • Karthik Rangappa says:

      DCC requires a penetration of more than 50% which is missing here – btw, we are building a mini library of sorts here where some of these patterns are covered, check out – https://zerodha.com/expert-advisors/

      • madhu nair says:

        appreciate the library. but, in the above chart do you think the trend was sideways before the DCC and hence the pattern should not have been considered?

        • Karthik Rangappa says:

          Two reasons why I would be hesitant to initiate a trade –

          1) After a good upmove, the stock was stuck in a range with low volumes – I would naturally tend to look for breakouts.

          2) The preceding few candles were stuck in a range, so as you mentioned it is not very comforting. Hence I’d tend to avoid.

  38. pramod beri says:

    sir how should we select the shares trade in??

  39. sebastian says:

    sir how do i set a target for engulfing patterns?

  40. madhu nair says:

    Karthik, a Dark cloud cover? the volumes were lower than the average on the pattern formation day though . the stock did correct the next day with a doji. how would you have traded the DCC day?

    • Karthik Rangappa says:

      This looks good Madhu, I would be tempted to set up a short trade on this – but the over all market seems to be positive. Hence shorting futures is ruled out. Hence I’d be happy to buy the ATM Puts.

      • vivek says:

        Sir, DId not get the logic here. Market is positive so trading in options better? If I see a pattern why shouldn’t I short in Futures?

        • Karthik Rangappa says:

          The risk reward of Futures and Options are very different. You have an unlimited risk in Futures, while in options the risk is limited. Hence people prefer options over futures.

  41. Anshul says:

    In the material on DLF example on bullish engulfing pattern for risk taking trader you have mentioned:

    One, the current market price at 3:20PM on P2 should be higher than P1’s close.

    Shouldn’t CMP at 3:20 be higher than P1’s Open and not Close?

  42. Praveen says:

    Mr. Karthik, how many of these candlestick patterns can be considered for intraday trading. i am more keen on that.

  43. Praveen says:

    And i assume that these are technical analysis strategies that will good for any instruments. Any futures i mean, even commodities…

  44. usha gupta says:

    Sir,
    As you said no sure method to know whethet the trade shall be possitive or negative. But we must look for odds by which we can have a positive trade.
    Your method of teaching is very fine and one can understand it well.After learning from you about the candlesticks,we need to know those odds.you may be talking about the technical analysis which we should know about each commodity.Which is difficult for all commodities.We must concentrate on one or to technicaly analyse those.For this we need to know about the reasonable data.
    So my questions
    1. where to get the data about commodities
    2And do we have a software which could calculate standard deviation or other factors taught by you.
    3 if we know all this then possibly we could get a positive trade.
    thanks, rest next

  45. Nayan says:

    Hello Karthik,

    Please find attached the daily chart for crude oil.
    Let me know your take on this please. Would be of interest to know how you would look at this chart.
    I see a hammer at the bottom there and a doji. Would you have gone long seeing this pattern mate?

    Thanks
    Nayan

    • Karthik Rangappa says:

      It would take lots of guts to go long looking at that tiny hammer. I would not have. However after the 1st green candle, I may have initiated a long trade.

      • Nayan says:

        Thank you Karthik.
        I have been surfing through charts after going though the whole module and I have noticed that especially on intraday charts you get to observe plenty of patterns through the day. Some of them give good results, some don’t. With your experience trading the markets, how would you rate these candlestick patterns?
        I read that you prefer the hammer over a hanging man. Likewise, which patterns would you consider the strongest and which would be second on your list.

        Thanks
        Nayan

        • Karthik Rangappa says:

          Nayan- honestly speaking simple S&R levels work well for intraday…combine it with patters such as engulfing, piercing, hammer, and hanging man. Also just make sure that you know which pattern to use for which stocks. Remember not all patterns work for all stocks….for example Bullish engulfing may work well for ICICI but may not work on HDFC. So make sure you get this part right.

  46. Nayan says:

    Thank you Karthik.
    Yeah, I need to start making a list of the stocks v/s the pattern. But I guess that would come from experience isn’t it?
    The more you read through charts, the more you know which pattern works for which charts.

  47. Uday Nara says:

    Hi Sir
    This is today Nifty Futures (Oct Series) 5 min Chart taken from pi,
    1.Bearish Engulfing
    2.Hanging man
    3.Bullish Engulfing
    4&5.Shooting Star
    6.Two Hammers
    Sir am i correct ?
    Thank you

  48. ashokm81 says:

    Hi Sir,

    This is 7-oct daily chart for Infy

    6th oct i have seen Bearish Engulfing pattern occurred in this share. But today 7th oct it will not go further down.

  49. Vikas Gupta says:

    In the 8.4(Presence of Doji), you did not mention whether we have to take position or short position. As per your saying, whenever a Doji is formed one should look for trading opportunity, but I am not able to get whether to buy or sell at that point. Please clarify. Thanks.

    • Karthik Rangappa says:

      The presence of a Doji after a recognizable candlestick pattern only strengthens the pattern. For example a doji after Bullish engulfing builds a stronger case for buying.

      • srikantheswar says:

        Karthick ,
        Is a green candle after bullish engulfing seems more positive signal than a doji after a bullish engulfing, since doji has some uncertainty whereas green candle denotes positiveness on bulls ?


        Thanks

        • Karthik Rangappa says:

          The presence of doji causes more panic to bears and kind of creates a desperation to square off the position. This usually leads to a sharper rally.

  50. Chirayu says:

    Hi Karthik,
    I am new to charting. Can you please explain from this live chart, what is the trend for the stock and how can one trade into it.

    • Karthik Rangappa says:

      Chirayu I’m afraid my response may confuse you more 🙂 – I would suggest you start from chapter 1 and follow the flow.

      • Chirayu says:

        Hi Karthik,
        Please do respond, I will start with chapter 1 and then use your response as validating the learning.
        That way I will re-nforce the learning.

        • Karthik Rangappa says:

          Looks like the stock is bottoming out!

          • Chirayu says:

            Hi Karthik,
            Thanks for the response
            1) What are the signals that indicate that the stock is bottoming out
            2) The stock made a high of 573 today and closed at 550 today ( of course NIFTY also went down today).
            I saw that the 5 day EMA crossed the 20 day EMA on october 13th.

          • Karthik Rangappa says:

            The fact that the stock is not making new lows indicates that its bottoming out.

          • Chirayu says:

            So when can we enter this stock. Are there any visible patterns ?

          • Karthik Rangappa says:

            Chirayu – this depends on lots of things. Please do read the whole module to build a perspective. No shortcuts in trading 🙂

  51. SaikiranGarapati says:

    Hi Karthi,

    Can i Consider the attached Just Dial Chart formed a Bearish Engulfing Pattern?

    Regards,
    SaikiranGarapati.

  52. SaikiranGarapati says:

    8th candle from Last, Can i consider that candle as a Doji or Hanging Man?

    From the 8th Candle, Again market is in Downtrend as per the chart, but as a basic rule for forming the bearish Engulfing pattern, The prior trend should be Up Trend? I am confusing whether to take last 8 candles or not, So please let me know, to check whether a particular signal has formed or not, How many candles i should consider?

    Regards,
    SaikiranGarapati.

    • Karthik Rangappa says:

      Yes, the 8th candle from last is a doji. In this case even though the last 8 candles form a downtrend …and therefore the prior trend criteria does not really qualify. However if you look at the generic trend you will realize that the stock is in a good up trend and more recently there is some sort of exhaustion in the rally. So you may want to take notice of this and initiate the trade.

  53. SaikiranGarapati says:

    Hi Karthik,

    If you see in Futures & Options, For each month there is a separate lot size is appearing. How they decide for this month, this is the lot size for particular script? Is there any formula for this?

    Regards,
    SaikiranGarapati.

    • Karthik Rangappa says:

      No, lot sizes are same across different months. However the lot sizes are changing in November hence you see different lot size for Oct and Nov. From Nov onwards you will observe all lot sizes to be the same.

  54. SaikiranGarapati says:

    Hi Karthik,
    Can i consider the candle which is 2nd candle from last as a Doji or Hanging man?

    Regards,
    SaikiranGarapati.

  55. SaikiranGarapati says:

    Hi Karthik,

    Can i expect circled one as a Support for this Stock as it has formed Bearish Engulfing pattern with Doji with increased volumes?

    It looks like correct opportunity for me to enter the trade(Paper trade)?
    Entering the Trade at 991.5 Target 760 – 780, SL 1058.Please correct me if my support position is wrong?

    Regards,
    SaikiranGarapati.

  56. SaikiranGarapati says:

    Hi karthik,

    Can i Consider Attached Ambuja Chart has formed Bullish Engulfing Pattern? Sorry to ask this type of queries..I am in dilemma whether to consider it or not because the present trend is sideways for me in the chart from last few candles..

  57. SaikiranGarapati says:

    Hi Karthik,

    What is Free float Market Cap(crs) which is showing in Nseindia.com for every script?

  58. tramadevi says:

    Sir,
    In piercing pattern is opening of P2 SHOULD BE BELOW/LOWERTHAN CLOSING OF P1(OP2<CP1)

  59. Abhilash says:

    Hi Karthik,

    I heard DOJI is a Trend reversal pattern some where. I mean if we see DOJI after a down trend, it will be a BULLISH signal and vice versa. As per the above article I read like it is indecision. I am confused now. Please clarify my doubt 🙂

    • Karthik Rangappa says:

      As I said, it does indicate indecision and most likely there could be a reversal…but you need to be prepared for both!

  60. Hari says:

    Karthik bro,
    Please help me with queries from image. Thank You 🙂

    • Karthik Rangappa says:

      If the pattern occurs at the top end of the rally, then its called Dark cloud cover. The one below is not a dark cloud cover. Same for piercing pattern.

  61. ishwar thawrani says:

    sir,can u tell me parameters for EMA,Bollinger Bands,MACD and please tell me Afl when close >EMA,Close>Bollinger Middle Band,Close>Macd Line this is buy situation .

  62. MAYUR says:

    Hallo karthik,
    can i consider this bullish engulfing partten after doji on M&M on 18 dec 2015
    can i go long plz advice

    • Karthik Rangappa says:

      At best you can consider this as a bullish Harami, please look for confirmation from other items on the checklist before going long.

  63. ANAND says:

    Can we consider 4th candle from right as hammer, followed by a doji showing indecision and then a green candle

  64. ANAND says:

    Hi Karthik, these tutorials have demystified TA , thanks for this tutorial initiative. Can I know your view if the last 2 candle form a DCC, so we can initiate short with SL being high of the bullish green candle.Also the volumes on the last candle are convincing. Thanks in advance

    • Karthik Rangappa says:

      One of the prerequisites for DCC is that the open on P2 should be higher than the close of P1, which is missing here. For this reason I would be hesitant to call this a DCC pattern. The volumes seems ok.

  65. prince says:

    Sir,
    For a Engulfing Pattern both bullish and bearish how to set a profit target.

  66. SaikiranGarapati says:

    Hi Karthik,

    Can we consider the last 2 cadles of SBI chart as a Piercing pattern?

    Regards,
    SaikiranGarapati.

    • Karthik Rangappa says:

      Not really, in piercing pattern the candle on P2 should open below P1’s close and then move up to close at least higher than 50% of P1’s range. Since this is missing in SBI, its not really a Piercing Pattern.

      • SaikiranGarapati says:

        Thank you Very Much…

        Can you help me to identify the Support for Canara bank and confirm me whether it has formed a Bullish Engulfing Pattern or not?
        It seems ok for me, but i could not able to find support and volumes also low on last day.So please give me your insight on this..

        • Karthik Rangappa says:

          Clearly there is no visible Support for Canara Bank. Yes, this looks like a bullish signal…I would set up an options trade here rather than naked future or spot market transaction.

  67. SaikiranGarapati says:

    Hi Karthik,

    Please confirm me NTPC has formed a Bearish Engulfing pattern or not?
    As i draw some boxes, Please confirm me Whether my understanding is correct or not.
    First box is Resistance one
    Second box Resistance two
    Third box Support one
    these three points are align with our Bearish engulfing pattern(On the same zone) but low volumes on last day. Please provide me your insight on this?

    • Karthik Rangappa says:

      Both 1st and 2nd boxes refer to the same resistance level, which later turns out to be the support level. This explains why the stock is showing some signs of correction at the same level now. I would be bullish on the stock considering it has moved up in the recent past.

      • SaikiranGarapati says:

        As it has formed Bearish Engulfing pattern with Doji on next day, to day it has formed a Red signal by covering that Doji..(I am speaking about last four candles)
        Can i expect the trend has been reversed? Volumes are not encouraging but Resistance is ok for me in the zone of 147 to 140 in 1 year chart..please help me to identify Resistance for this or confirm me whether my resistance zone is correct or not.

  68. Hi,
    Can you tell me your view on last candle of the Bharatforge? Is it a Doji or Paper Umbrella? Last previous candle is a Bearish Marubuzu, I am in dilemma whether it is a Bullish Harami or Maubuzu with Doji?

  69. Rachit says:

    Hi,
    Bearish engulfing pattern should be followed by a up trend, but what if I see this pattern after a down trend does it signifies more down side or nothing

    Below is CAIRN Fut daily chart
    Last candle is certainly engulfing the previous one, it is also red.
    But the problem is it is at the toon of the down trend
    Bit confused ……

    • Karthik Rangappa says:

      Yes, bearish engulfing pattern needs to appear on top of the chart. This one can be treated as a continuation of bearishness.

  70. Anoop says:

    Hi
    Can you kindly confirm the patter weather it’s an bullish engulfing do I need to go long on this ??

    • Karthik Rangappa says:

      For a Bullish Engulfing pattern, the opening on P2 should be lower than the close on P1. For this reason the pattern is not really a Bullish Engulfing pattern.

  71. abhishek kumar sah says:

    in one of your previous comment(shown in the pic below..) you have asked the person to hold on to the stock till the SL is reached.
    But in shorting the trade has to be squared off the same day itself.. how then can we hold on??

  72. abhishek kumar sah says:

    your comment..

  73. abhishek kumar sah says:

    the chart..

  74. SaikiranGarapati says:

    Hi Karthik,

    As Maruthi has formed, Bullish engulfing pattern with good volumes,What is your view on this?

  75. tejaswi says:

    Hi kartik
    Can i consider the multiple candle sticks for 5 min chart.?

  76. Jitendra Nikam says:

    Hi Karthik,

    I can understand for bullish engulfing trend should be down. But what if bullish engulfing pattern is formed in up-trend. And vice-versa for bearish engulfing. For example Lupin has formed bearish engulfing twice in last 7 days on daily chart when trend was donw.

    Thank you.
    Regards,
    Jitendra

    • Karthik Rangappa says:

      Prior trend is an important factor for the Pattern to work. I would suggest you ignore patterns which don’t comply to this rule.

  77. Roshan says:

    Hey Karthik –
    Is it possible to do a short trade at the close of day. I was thinking all short trades other that F&O get squared off at the end of day. Is there a chapter clarifying this ?

    • Karthik Rangappa says:

      If you short in spot market then you will have to square off by 3:20 PM, however you can carry forward your short position in Futures and Options.

  78. SaikiranGarapati says:

    Hi Karthik Sir,

    To day i have seen a Bearish engulfing pattern in Voltas(please confirm it from your end also) but volumes are 1,35,000 lower than last 10 daya avg volume? Can i consider this short trade even though volumes are low?

    • Karthik Rangappa says:

      It does, please do confirm if all the other parameters fall in line before initiating a short trade. Good luck.

      • Saikiran Garapati says:

        Hi Sir,

        My Doubt is even though it is lower than the 10 days avg volume, Can i proceed up to what extent like if is below just 50,000 of last 10 days avg volume, can i proceed or not?

        • Karthik Rangappa says:

          Its best to compare today’s volume to recent past average volume….something like 10 days is good as it gives a good sense of whats happening in the recent past.

  79. SaikiranGarapati says:

    Hi Karthik Sir,

    Is HCL chart has formed a Piercing pattern?
    If possible please identify a support and resistance for me?

    Regards,
    SaikiranGarapati.

  80. SaikiranGarapati says:

    Hi Karthik Sir,

    I hope Drreddys formed a Morning star with increased volumes compared to last 10 days and SL is on support level and i am finding difficulties in finding targets(i know next resistance will act as target1), but unable to find a Resistance (target) and what are all other check points i should consider to take a trade other than Candle stick Pattern, Volumes ans S/R?

    Please let me know your views.

    Regards,
    SaikiranGarapati.

  81. Pratik says:

    These have been the most useful stuff i have ever come across related to stocks- right from the first module and I’m enjoying every bit of it. Eager to continue learning from the later modules as well. Thank you so much Karthik for the efforts you and the team have put in.

  82. Tejas Jhaveri says:

    While going through the technical analysis part I came across 2 candlestick patterns listed below :
    1. The Dark Cloud Cover
    2. The Piercing Pattern

    1. The Dark Cloud Cover formation requires the second day red candle to open above the highs of the first day candle, than only it forms a classic dark cloud cover pattern. Whereas in Bearish Engulfing Pattern the second day red candle needs to open above the first day’s close and not the high. I had a doubt what happens if its a dark cloud cover with a variation where the second day red candle opens above the previous day’s close and not above the highs. Will the pattern still hold significance? The same doubt applies to The Piercing Pattern?

  83. srikantheswar says:

    Hi Karthick,
    Images on the comments are not visible, earlier I have informed about it along with Vishal Saini in this page , any updates on that? Not able to see a reply option on that chain message , so posting it again here separately.

    Thanks

    • Karthik Rangappa says:

      We have checked this on many different browsers and it seems to be working fine. Note sure which images you are talking about.

      • srikantheswar says:

        Images in articles are visible and in fact they are really superb , credits to the designer. I am talking about the Images that people attach in the comments it’s not visible. I don’t see option to add images in my reply either…

        • Karthik Rangappa says:

          Let me check this right away!

          • srikantheswar says:

            Hi Karthick,
            Sorry for bugging you too often, just to let you know the issue still exists for me.

          • Karthik Rangappa says:

            Really sorry, we are uable to figure out the issue. This is working absolutely fine with all of us here.

          • Senthil Kumar N says:

            Me too…

            I’m using chrome and is able to read the questions raised in comments however no charts are visible… Request to kindly sort it..

          • Karthik Rangappa says:

            I use Chrome too, Senthil. I can see the charts. Can you please do a hard refresh of the browser once? Thanks.

  84. SIVAJI K says:

    what will happen with allotment of equity shares ?>will it leads to decrease or increase the price?

  85. Rajiv says:

    Hi Sir, on the topic of ” whenever a doji follows a recognizable candlestick pattern, the opportunity created is bigger.”My query is can the candlestick pattern be single pattern followed by doji also give bigger opportunity? also what should be the volume on p3? should that also be above 10 day average volume. Thanks.

  86. Satpal Singh says:

    Rule snout the stop loss is described, but what shall be target is not explained. Is there any rule for the same.

  87. Santosh says:

    Sir, can tell me by seeing the chart of the SBI on 14th Oct 16 …..If it is a bullish Harami

  88. Rakesh says:

    Hi Karthik, a small doubt
    what if a doji is formed after a bullish engulfing pattern , will the consecutive sessions form blue candles???
    Thanks and Regards

  89. N V V SRINIVASA RAO says:

    Sir,
    The subject presented is very good and useful to beginners.I have gone through many books but are very exhaustive and this material is exceptional and very useful.Koodos to your effort.

  90. harago says:

    can we take this as bullish engulf ? just to test my understanding, see 1/11 and 2/11

    https://kite.zerodha.com/share/Q2JM7K3WQ5.png

    • Karthik Rangappa says:

      I do see a BE pattern, but not sure if both of us are seeing the same. I’m referring to the 6th and 5th candle from the right.

  91. harago says:

    which time frame suits best to identify engulfing patterns ?

  92. Saikiran Garapati says:

    Sir,Please confirm that M&M has formed a Bullish Engulfing pattern with good volumes?

    Help me to identify the Support and Resistance, As of my knowledge Support at Pattern low and Resistance is at 1350 to 1370?

    • Karthik Rangappa says:

      It seems to have formed one. I can help you if you have been stuck somewhere, so please do let me know which part is difficult for you to understand.

  93. Saikiran Garapati says:

    Can’t upload the attachment here?

  94. Divy says:

    Do you think NIFTY has formed a piercing pattern on Dec 5 ?

  95. Rajiv says:

    Hi Sir, can you please clarify if HCLTECH on Dec 16 formed a bearish engulfing pattern with volume above SIMPLE 10 day average. This is on a daily chart. Thanks. I am not seeing a place to upload the screenshot. apologies for the inconvenience. Thanks.

  96. Mehul says:

    Hi karthik
    Thanks for the initiative.
    Would like to ask that at 8.4 the presence of doji u mention about the chart but there is no chart visible. This has happened earlier as well sometimes.
    One more thing sir I m not able to distinguish between an online and offline broker as both give almost all the services barring the trading tips. Can u please help.
    Thanks in advance.

    • Karthik Rangappa says:

      I’m able to see the chart Mehul, can you please refresh your browser again?

      An online broker renders all his services online, however an offline broker has physical office, and services are rendered both off and online. The world is moving towards online services, it is more efficient, transparent, and quicker. I’d suggest you opt for an online broker.

  97. BB says:

    Hi KARTHIK!
    To see/read such content, it’s wonderful. I hope this will be bringing a lot of business to Zerodha.
    My Q: to start with I am a rookie, but i have this basic concern about the highest/lowest as the stoploss in bearish/bullish engulfing pattern. Why high/low respectively & not any other value? need a little clarity around the same. Thanks in advance!

    • Karthik Rangappa says:

      High / low are crucial turning points for the stock….at these points the sentiment changes. Hence the importance for these price points.

  98. aravindt says:

    What exactly is the thought process for piercing pattern and dark cloud??

  99. AMIT KUMAR PANDEY says:

    dear sir;
    kindly clarify my doubts-
    1)can we use MOVING AVERAGE for confirming the trend? If yes, than what would be the paramaters?
    2)For intraday trading whether to identify trend on EOD , HOURLY, intraday chart?
    Thanks in Advance.

  100. ALOO says:

    Hello! A fabulous guide thanks for the effort!
    Please clarify my doubts-

    Yesterday I saw a Marubuzo being formed in SBI so I expected it to be a bullish day today as the support and stop loss was under 4% difference and even the volume almost near the avg volume(not touching the volume SMA). But yet it just went the opposite direction today. What could be the possible reason for this ?

    Link to SBI chart – https://drive.google.com/file/d/0B0bePrdjZCDoVmYwXzVabkdra3c/view?usp=sharing

    Also, I saw a piercing pattern in SonataSoft which was followed by a doji, so as you’ve suggested that a doji highly increases the chances of a trade going in the pattern direction I expected this to go bullish today, even the support was under 4% difference and volume was almost close to the avg volume(not touching tho). But today it went the opposite direction. What did I do wrong ?

    Link to Sonata chart – https://drive.google.com/file/d/0B0bePrdjZCDoOUU5dUlYdktrRVU/view?usp=sharing

    A general question – Consider a hammer has formed, the subsequent candles are green and the volume stays above average for 2 trading sessions but after that the volume gets below the average volume on 3rd day(the candle is still green). So, does it mean that the pattern trend is diminishing or weakening ?

  101. ALOO says:

    Couldn’t reply there dunno why

    Yes, the % change is 5.1% for the Cairn chart, but still arent the candles low in number ?

    And sorry but I didn’t get what secondary trend taking over primary meant. Do you mean that the primary trend which was up has ended as several red candles are taking place after every few green 1s ?

  102. Saikiran Garapati says:

    Hi Karthik Sir,

    Amar Raja was in downtrend for a while but from last 4 trading sessions it gives a signal of uptrend as of my knowledge, But Yesterdat again it has formed a Dark Cloud Cover Pattern with low volumes, So can i consider it goes down? What are all the possible outcomes here?

    The Dark Cloud Cover

  103. Ayush says:

    Is multiple candle stick pattern mostly used for two or more trading days?

  104. Ananth says:

    Hello Karthik,
    While going through the queries I found one of the answers where you mentioned that you prefer 15 minutes time frame for intra day for determining the trade using the checklist. If I am looking at Nifty 50 shares then, my quirks are:

    1. Is it possible to check all 50 shares in 15 minute time frame. If yes then how. Or any other alternatives.
    2. For the swing traders like you have mentioned if there are positive pattern to enter into the trade at 3.20 pm, however for 15 minutes trader at what minute he should enter into the trade.
    3. For intra day is better to be a risk trader or risk averse trader due to less time frame.

    Please clarify. Thank you in advance.

  105. Ananth says:

    Sorry for the typo errors.

  106. Mayank Mishra says:

    Hey Karthik,

    First of all, thank you!

    My question is, do we have any module where we can find how to set Target, as you taught us how to set stoploss.

    Regards
    Mayank

  107. pushkar says:

    how to attach a chart image in the comments ?

  108. Manish Agarwal says:

    I was looking at the chart of Axis Bank for 11th (P1) and 12th Apr (P2). Based on that I have few questions.

    Scenario:

    On P1 it has formed a blue candle and on P2, a long red candle which engulfs the P1’s real body. Based on this, I concluded that it is has formed a bearish-engulfing pattern (The prior trend does not seems to be bullish, it seems sideways or slightly bullish, but lets assume it is bullish for this example)

    (Q1)

    What should be the length of the P1’s real body in proportion to P2’s candle? (A) P1’s length be slightly less than the P2’s candle (B) It can be of any length but shorter than P2’s candle?

    If your answer is (B), then:
    What if P1’s candle is already a recognized candle stick pattern like Marubozu, spinning top, Doji, paper umbrella or shooting star.

    In this example, on P1 candle is a spinning top and is a blue color candle.

    So in this case, should we ignore the P2 candle and read the chart based on P1 candle only? OR combine the P2 candle with P1?

    (Q2)

    Does all the candles in a chart have a recognized name? Does the candle of 12th Apr form any recognized pattern? As per my understanding it is just a long red candle.

    Thank you in Advance. I have tried to make my query as clear as possible for you and other readers.

    • Karthik Rangappa says:

      Q1-

      A) Can be any length but shorter than P2.
      B) Does not matter – its best if both P1’s pattern and P1 and P2 together point to the same possible outcome. However, I wont read too much into the colour of a spinning top.

      Q2 –

      1) There are multiple patterns, practically impossible to know everything. However, you need to eventually start relating to the price action behind the candlestick patterns. Pattern names dont matter much.

  109. shabaz says:

    In the fourth diagram,
    isn’t it a formation of hammer instead of bullish engulfing pattern.
    if is not, please explain.

  110. Jayadevan M says:

    Hello Karthik,
    This varsity is really informative and easy to understand.
    I have a query. in the Engulfing patterns, In intraday, how can an trader be risk taker at 3:20 on P2. I mean at 3:30 markets close and why should a risk averse trader wait till 3:20 of next day of P2, can he not validate this pattern after market close on P2 and go long next day.

    • Karthik Rangappa says:

      Glad you liked it 🙂

      Technically, the trader is expected to take the position after he gets a confirmation of the pattern on a closing basis.

  111. gauravbhandari says:

    Hi Karthik,

    How do I upload a file here? I’m seeing TGBL today and I think it was forming a bearish engulfing pattern with a Doji…but today it is going up. 2 questions –
    1. Is it a correct pattern that I have identified?
    2. If yes, any reason why is it going up today?

    If possible, I’ll try and upload a file for it.

    • Karthik Rangappa says:

      1) Yes
      2) TA does not guarantee a movement, it only enhances the probability of an event occurring.

      • gauravbhandari says:

        Thanks for the confirmation Karthik. Is it possible that for bearish engulfing pattern(or for any pattern for that matter) the stock will go down even if the pattern is broken today? If yes, what is the max. no. of intervals we can consider (like 1 day if considering EOD).

  112. pushkar says:

    the chart https://ibb.co/ieQcfk shows formation of the hammer after a downtrend of 5-6 trading sessions but the volumes are not above average of last 10 days so the hammer pattern is not credible hence ignored, but at the end a bullish engulfing pattern is formed with volumes above the average of last 10 days however the next days (last day on chart ) a red candle is formed. My question is, can this pattern qualify as a bullish engulfing pattern? the prior trend should be a downtrend for a bullish engulfing pattern. is the prior trend enough downtrend for the formation of a bullish engulfing pattern ?

    should the trend after the hammer formation be only considered for bullish engulfing pattern (they are all red candles but mostly are spinning tops) or the downtrend from around 67.50 after which hammer pattern was formed should also be considered?

    • Karthik Rangappa says:

      Tricky, I would not really qualify this as a bullish engulfing pattern due to the lack of prior trend. But then, its all about being flexible, I may have considered this as a trade, but would have played safe with an options trade.

  113. pranay says:

    when a bearish candle is formed, the opportunity is to short the stock and risk taker would do it on P2 day itself. But aren’t we supposed to square off the short selling transaction on same day itself?

  114. KUMAR MAYANK says:

    Today TCS EOD forms the pattern of doji and earlier it formed a dark cloud cover. Also volume is more than 10 day avg. Does it confirm that TCS will fall from 2446?

  115. Arun mendiratta says:

    In the example of piercing pattern example u have mentioned that if P1s range is 12, P2 s range should be atleast 6 or higher but below 12.
    Shouldnt it be If P1s range is 12, P2 should engulfs atleast 6 or higher but below 12???

    • Karthik Rangappa says:

      The idea is to ensure that that the range of P2 is at least 50% of P1 but lesser than 100%. If it is 100%, then that is essentially an engulfing pattern.

  116. ARUN MENDIRATTA says:

    Hello karthik,
    can u plz tell me how authentic is the screener website? have u used it?
    http://www.screener.in

  117. R C Vamsi Vardhan says:

    Is PDF’s of Varsity content removed from the site? If not, could you please provide the link? It will help me to use it in my Kindle and refresh while I am in commute.

  118. sudheer says:

    Hi karthik,
    can you please check the attached chart in https://ibb.co/mEMvCF . I could see that the stock has formed Bullish Engulfing pattern on 4th Aug 2017.Kindly confirm.Also how to set targets for such trades when there are suitables resistance points?

    Thanks,
    Sudheer

  119. Sudheer says:

    I have posted a query with a image url on 5/8/17,but seems the comment is deleted..

  120. Hi Karthik,

    Cheers for the great work.

    A question: for Bearish engulfing pattern, If we do shorting at the end of P2, then can we carry it( the trade) forward to next day or more number of days in order to square off. I have understanding that shorting is an intraday activity, please correct me if I’m wrong; A beginner.

    • Karthik Rangappa says:

      Shorting in the spot market is an intraday activity. However, you can short and carry forward the position in the futures market.

  121. ARUN MENDIRATTA says:

    Hi karthik,
    I was going through chart of ACC . I have a query on that .Should i consider a drop of 5% price (in 8-9 trading days)in previous trend to satisfy for a bullish engulfing pattern .Or should the drop be grater than that?

  122. Abhisek says:

    Putting stop loss at lowest low of two candles when buying, i can understand it, it is to minimise the loss. But putting highest high of two candles when selling,
    I didn’t catch it properly.
    Pls help.

  123. Ash says:

    Can we use the chart patterns for the Nifty 50 Index and buy or sell Nifty 50 Index option contracts accordingly like how we do for the stocks?

    • Karthik Rangappa says:

      Yes, thats it needs to be done.

      • Ash says:

        So is the nifty driven by the people selling or buying the nifty 50 index futures/options itself or as a result of the performance of the 50 stocks under it or both? Hope you got the intent behind the question. Asking since I thought the pattern is not determined by the buying or selling of the nifty index themselves but because of the stock performance under it, so how will the candle stick pattern correctly work in general when playing nifty index (since the 50 stocks are diversified from different industries and hence there can’t be a general trend), it won’t work right?

        • Karthik Rangappa says:

          This is exactly the point, the collective action results in the index movement and is further summarised as OHLC, which is represented in the candlestick format.

          • Ash says:

            Ok so when I trade in the Nifty 50 Index in derivatives segment, if say I trade in Options, the demand affects the option price right, if more people buy the option price may go up and the trade might not be much profitable, so is it safe to say that its always beneficial to trade in Futures than in Options when I know for sure where the Nifty index is headed?

          • Karthik Rangappa says:

            Not really, remember, for every buy trade there is a counter sell trade.

  124. kunal says:

    what u mean by session here?

  125. Abhishek Parida says:

    It’s so nice to see that Kartik still takes time out to reply to the queries. Just wanted to know what drives you to be so motivated after more than 2 years.

  126. Ketan says:

    Hello Sir,
    You are just great who even after being so busy takes out time to help others we are really grateful to you.
    I have one confusion sir as you had explained in the beginning of this module in a chapter that when there is a buyer of a particular share at the same time there is also a seller to sell the share and the trade is carried out between them.
    So my question is if there is same amount of buyers and sellers in the market how are the prices drived from going up and down please help me with this.
    Thanks & Regards,
    Ketan 🙂

    • Karthik Rangappa says:

      This depends on the market sentiment. If the sentiment is bullish, then the sellers will quote higher prices and buyers would not really mind paying higher prices (therefore the price tends to go up). Likewise, if the sentiment is bearish, then the buyers would be willing to buy by paying lower prices and hence the price starts to move lower.

  127. Ashit Vora says:

    Sorry for the naive question but can positional trade be shorted?
    When is it shorted, what is delivered to the person who buys it until my target is hit or stop-loss is breached?

  128. Alok says:

    Hi, In lot of places you have mentioned to enter the trade(Short) at 3:20 PM (for Risk Taker). As far as I know short trades have to be squared off on the same day. So how does one go short beyond 1 day. Thanks.

  129. Palash Barania says:

    Hello,
    Zerodha Varisty is a very nicely curated learning material and easy to understand as well.

    My question is whether these technical analyses patterns apply to the option premium charts as well?

  130. Prakhar says:

    How can i apply these patterns for intraday trades as positions have to be squared off on same day after initiating trade at 3:20pm.

  131. Rahul says:

    Which software is good for scanning live candlestick patterns currently formed or forming in Cash and Derivatives and MCX market such as bullish engulfing, hammer etc. Please advise the cost per month as well if you have any info?

  132. Rajeev says:

    The DLF Nov future today forms a bearish engulfing with doji. Will it tantamount to larger decline tomorrow?

  133. V.Vivek says:

    Hi Kartik,

    Have a look at this link below

    https://drive.google.com/open?id=1vBE7c8A7jXvJU4BYJxZeVkCEKtyQ1XoL

    We have a bearish engulfing pattern followed by a bullish harami in the recent two-three trading days. What is the usual sentiment in such cases? Being a risk averse trader, I presumed the price would go down, however, with a bullish harami the situation entirely changed. These are confusing positions in the market, please help me understand this situation and how do we read such patterns.

  134. chidambaram says:

    Hi Sir,
    You have illustrated that whenever a doji follows a recognizable candlestick pattern,the opportunity created is big ,I have a doubt that say in bearish engulfing pattern,if there is a Doji on P3 ,doesn’t it mean that the bear are not yet strong even after forming the engulfing pattern on the P2? This doubt arises because in one chapter you have mentioned that “hammer is more better than hanging man since bears couldn’t take the control yet that why the price goes up again”.

    • Karthik Rangappa says:

      Yes, confusion prevails and this is exactly what makes the presence of doji so powerful. Remember, confusion creates panic, and panic leads to bigger price movements.

  135. Ritesh says:

    What target do we set for bullish and bearish engulfing? I guess you have mentioned only about stop loss. Also wanted to know a tentative investment period in the above patterns..

    • Karthik Rangappa says:

      Stoploss is based on support and resistance (at least one way to look at it). I’ve explained this later in the chapter. You hold these patterns, till about the time your target is achieved.

  136. Raghav Singh says:

    hey sir first of all really thank you for assembling such a great content at a single place.
    Sir my doubt is that during watching for multiple candlestick pattern should we ignore the upper and lower shadow and only consider the body?

  137. chidambaram says:

    Hi Sir,
    1) What if the P2 day of the Bullish engulfing has a slight gap up opening(say a 0.1% to 0.2%) instead of “Second, the open on P2 should be equal to or lower than P1’s close” .Can this be taken as a positive factor to enter the trade,if all the other checklist item are positive? or it isn’t a bullish engulfing and should we avoid it?
    2) If so we can enter a trade for a bullish engulfing pattern with slight gap up opening on P2 ,then what about a large gap up opening (say more than 0.5 % to 1% or even more),can that to be considered as a good signal to enter the trade,if all the other checklist item are positive ? or these trade to be avoided?

    • Karthik Rangappa says:

      1) Yes, you can accommodate this as a bullish engulfing. Remember, candlestick pattern permits you some flexibility.
      2) Not really. Remember, P2 opening should be as close to as possible with respect to P1 closing.

  138. Rohit says:

    Hello Rangappa,

    That was simply a great document which you made.Really simple and illustrative,hats off to you.
    I can see that a bullish engulfing patter was formed in Tata Motors on 30-12-2017 and the trend continues as per your description of the pattern .Now as the pattern goes this trend i.e the uptrend is suppose to continue.Would like to have your comments on this .

    Regards,
    Rohit

  139. Rohit says:

    But ,there was an unanticipated fall at the end in the stock today .This I guess represents the classic case where we have a bullish engulfing patter but still the stock feel ,though after initial gains in early hours of trading.
    I would like to know how are we suppose to anticipate the movement tomorrow in case such situation comes into play.

    Regards,
    Rohit

    • Karthik Rangappa says:

      This is exactly why we need to stick to stoplosses 🙂

      Sometimes the pattern looks so convincing, but then the market is full of surprises!

  140. Abhishek Jha says:

    Do candle stick patterns apply for any quanta of session or is there a limit on that? For eg. Can I go with the candle patterns formed hourly? Is there a limit on min or max duration for candle stick? How duration size impacts candle stick patterns?

  141. Swapnil Kadam says:

    What time frame use to study market?

    • Karthik Rangappa says:

      Really depends on your trading frequency and risk appetite. If you are looking at short-term trading then, maybe something like a 5 or 10 mins time frame may work…if you are looking at longer term then something like end of day works.

  142. Swapnil Kadam says:

    Hey,
    I got confused in short forms used like P1 & P2. It seems like P1 is for hole day pattern of day 1 but at some places its seems like P1 use to talking about one single candle.

    • Karthik Rangappa says:

      In P1, p stands for the pattern and 1 stands on the day pattern has formed. So P1 means the 1dt day of pattern formation, P2 for the 2nd day of pattern formation etc.

  143. Rajesh Reddy says:

    The example shown in Dark cloud looks more lo Bearish Harami… why can’t we consider it as Bearish Harami?
    Kindly reply me
    Thank you

    • Karthik Rangappa says:

      Not really, P2 of bearish Harami pattern is completely contained within P1, whereas in DCC, P2 is just halfway through within P1.

  144. Ishwari Saraogi says:

    While we trade using candle stick pattern and there is sudden general but important news (i. e; unfavorable Standard and Poor rating for India or India’s rating downgrade) which may cause the stop loss to hit due to overall fall in the market. In this event should be temporarily remove the stop-loss as there is nothing wrong with the scrip but just the overall sentiment of the market caused the fall in the stock?

    • Karthik Rangappa says:

      This is quite common and happens almost all the time 🙂

      As long you have the conviction to hold the trade, you should. But remember, your conviction is also a function of how well you can factor in the macros.

  145. Kailash says:

    Hi,

    What is P1 and P2 in this case and how do we establish that the day is bearish or bullish?

    • Karthik Rangappa says:

      P1 refers to the first day of the patter occurrence and P2 refers to the 2nd. You combine these patterns to identify if the outlook going forward is bullish or bearish.

  146. Kailash says:

    The first day of the pattern (P1) should be a red candle reconfirming the bearishness in the market. What really is the meaning of this?

  147. Chimbu says:

    Karthik Sir,
    Awesome study material and you have the gods gift to explain things in a simplified way. May God bless you !

    How can I view the charts posted by others to understand the xplanation/comments better. Use Chrome / Windows10
    I’m a newbie to this forum and stock mkt.

    Thanks

  148. Daniel says:

    Dear Sir, I have a doubt with regard to the first chart of this chapter (Biocon). In this chart the 10,11,12 candle from the left show no movement at all, its been stagnant that entire three days. Could you please teach me Why and How this happens?
    Thank You!

  149. Sunil Kumar says:

    Hi karthik
    In 15 min or 30 min intraday chart, sometimes rule 1 that is buy on blue candle day may be violated. Can this come under flexibility in the context of small time frame trades. Or Rule 1 is better to be followed in small time frames also?

  150. ROhit says:

    Hi Karthik,

    Great write up…!!!
    On 08-02-2018 Tata Steel formed a bullish engulfing patter and the the very next day i.e on 09-02-2018 we saw the trend continues i.e the Bulls took the stock up.
    I just want to know how we find out till when this upside move will continue .Whether the next trading session will be dominated by the Bulls or the Bears will come into play.

    Regards,
    Rohit

    • Karthik Rangappa says:

      You cannot really predict this, Rohit. The candlestick patterns only enhance the probability of the trade turning positive. There is no guarantee that the price will move in the desired direction.

  151. Sri says:

    1. Can you please tell me if these patterns can be applied to only intraday charts that is 1, 3, 5 or 15 minute charts (which is the most suitable among these based on your experience) or can be applied to 1D, 1W, 1M charts as well?

    2. If I use this on, let’s say a 1D chart and I find bears will dominate, how do I go short? I thought we can only short on intraday trades.

  152. Apurva A Kunkulol says:

    Hi Karthick,
    I have tried to spot a few patterns in Hindalco chart and the description is as follows:
    1. Dark Cloud cover.
    2. Bearish Engulfing
    3. Piercing
    4. Bearish Engulfing
    5. bearish Engulfing
    6. Bearish Engulfing.
    7. DCC
    8. DCC
    9. Bearish Engulfing
    10. Bullish Engulfing
    11. Bullish Engulfing.
    12. Piercing pattern.
    13. Bullish Engulfing.

    • Karthik Rangappa says:

      Would have been happy if it had moved slightly higher, but anyway, yes, I’d consider this a piercing pattern.

  153. satish says:

    Today HCLTECH has formed bearsih Harami. Am i correct?
    Assuming all other checklist is satisfied, one should short the trade. But at 3.20 pm i cant short the trade.
    Shorting on intraday is working but that wont be the scenario in the articles.
    what should i do here. Going long is clear for me. Going short it what killing me as i am unable to do.
    Please help me in this Karthik with some clear answer how to go ahead on shorting.

    Thanks in advance

  154. Akshay says:

    Hello Karthik Sir,
    I have opened an account with zerodha 1 year back and then I came across Varsity. I am glad to have access to such an insightful content. I thank you (especially you because I already consider you my Guru, not just in words. I’ve watched your videos on youtube about – How Much Money Do You Need When You Retire and Reading Cash Flow Statements and analysing a company. Sir all the information and knowledge you deliver goes straight into the head. It is absolutely crystal clear) and your team from the bottom of my heart for all the efforts you have put to educate people on stock markets.
    I’m a civil engg student with no knowledge about stock markets and I’ve been reading through varsity since past few days. Sir, I’d be grateful to you if you help me with the following:

    1) Other than Varsity should I also refer some books available in market on value investing etc. or is varsity content sufficient for a novice like me? If yes which books would you recommend?
    2) I have opened account for equity as well as Commodity but I have no knowledge of Commodity and F&O markets. Should I first learn everything about equities and then step into Commodity and F&O or should I simultaneously learn that too? Is it true that the equity market is safe if I go through the fundamental analysis?
    3) Should I completely avoid Intraday trading as a beginner or it shouldn’t be done at all at any stage?
    4) In the technical analysis I understood the stoploss we should place while buying a stock so that once the trade is started either target is achieved or if the stock goes down, the stoploss is hit. The confusion is the stoploss while selling. I didn’t understand how is stoploss used while selling.
    I would be grateful if you reply to my queries.
    Thank you.

    • Karthik Rangappa says:

      Akshay, I’m so glad you liked all the content on Varsity. Thank you very much for the kind words.

      1) The content on Varsity certainly helps but then you should look at going beyond. I’ve recommended a set of books here – https://zerodha.com/varsity/chapter/finale/
      2) Yes, that sequencing will certainly help. There is nothing that can be considered safe in markets, they all come with its own set of risk and reward characteristics.
      3) Take your time, experience holding positions overnight before even venturing into day trading
      4) I’d suggest you read the chapter on shorting, this will give you a sense on how shorting works and therefore the stoploss placemenet.

  155. SAHADEV says:

    assume there is a situation where the ICICI Bank stock forms a piercing pattern and the HDFC Bank stock forms a bullish engulfing pattern

    —-icici stock forms a piercing pattern ? It is dark cloud pattern right…

  156. J says:

    hi,

    how can u enter a short trade at 3:20 pm….isn’t it too close to the end of the day to be able to square off?

  157. Krushna Honrao says:

    In the bullish engulfing pattern’s last chart.Can we consider the red candle as a hammer?

  158. Ujjal says:

    very good book very nicely written. Recommended for absolute beginner who want to learn basic to advance.

  159. Krushna Honrao says:

    If Presence of doji forms a big red candle in next day how is that profitable? How is this a good opportunity?

  160. Sai Krishna says:

    Hello Sir,

    I must say, the modules are amazing for starter like me. Your way of teaching is amazingly unique. Thank you so much.

    I have a question. Let’s say, I placed a trade based on Bullish Engulfing Pattern and Market moved in favour and after few sessions (1 or 2 trading sessions) I saw Bearish Marubozu. What should I do? Should I exit ? What to do in such cases, where another recognizable candle stick appears before my Target is hit ?

    Waiting for your reply!

    • Karthik Rangappa says:

      Glad you liked the content here 🙂

      Here is the thing – once you enter a trade, you hold on to it till your target is hit or till your SL is triggered. Even if you see another pattern emerging.

  161. Hiten says:

    Hi, sir
    Please help me out in understanding, what does the day means does it mean next day or next candle and why should we check the time at 3.20 pm before entering the trade after we see engulfing pattern..

  162. sahadev says:

    I am confused. Engulfing means is that the P2 first candle of the day should engulf the P1 last candle of the day?

  163. Anurag Dusada says:

    Sir, is the chart of Coal India satisfying Key takeaways no.9 – The presence of a doji after an engulfing pattern tends to catalyze the pattern’s evolution?

    • Karthik Rangappa says:

      Yes, it does 🙂

      • Anurag Dusad says:

        Thank you Mr. Rangappa. I am currently long on Coal India. Should I add more here? Kindly advice.

        • Karthik Rangappa says:

          Please make sure all the other variables comply with the checklist. Remember your stop loss. Also, since the overall market is weak, you may want to consider taking an options trade on CIL instead of futures. Good luck.

  164. Roshan says:

    Hello sir, please correct me, is on 26/6/18 in coal india stock the bullish engulfing pattern was formed. As there was down trend, 26/6 candle was green, 27/6 was green too. Volume was above average, perfect for long position. But 28/6 is red candle.

  165. Apurva A Kunkulol says:

    Hi Karthick,
    I came across an interesting candlestick while going through the charts of TataPower, please check the link for it. I have marked the candlestick with a rectangle. The OHLC data has also been highlighted for reference. I can’t comprehend the happenings on that day.
    Link: https://drive.google.com/file/d/1CHI5fTy8JtzvYigIc8ARD6kUn7VRRz-M/view?usp=sharing
    How can a stock open at 0 when the previous day it was trading at 84.85?
    Even if the close on that day is 84.85, then how come the high is 0?
    Even if we consider the candle as a Marubozu, then the high and close should be equal, right?
    How come the price could jump from 0 to 84.85 just because of a volume of 100 shares?

    So how to understand what exactly might have happened on that day?

    • Tata Power went through a category change on 14th May 1999 from EQ to BE. As per the bhavcopy for 17th May 1999(next trading day), the previous day’s close was captured as 0 instead of the price it closed on 14th May which has resulted in the erroneous candle being formed.

  166. Harshajeet Patil says:

    Hello Sir,
    The above information has one statement as ‘Later in this module I will introduce a 6 point trading checklist. ‘; however, I could not see it at end of this module/chapter.

    Can you please let me know which topic I need to refer.

    Thank you.

    Regards,
    Harshajeet

  167. Apurva A Kunkulol says:

    Hi,
    Would the patterns formed on 25-Mar-1998 and 26-Mar-1998 in TataPower,together, be qualified as a Dark Cloud Cover.
    Also the same for 04-Aug-2003 and 05-Aug-2003.
    More importantly, I want to know whether the trends before each of them can be called, Up trends?
    Could you share your thoughts on this?

    Thanks.

    • Karthik Rangappa says:

      I’ll have to dig through the charts for this. By the way, why are you looking so far back in time?

      • Apurva A Kunkulol says:

        Hi Karthik,
        No worries. I was just trying to see how effective the engulfing pattern has been throughout the history of TataPower.
        Secondly I attempted to spot as many instances of the aforementioned patterns, as possible.
        Probably I am being a little naive here, but I was trying to check how frequently, these patterns caused a price reversal.

        Thanks.

        • Karthik Rangappa says:

          I get that, makes sense Apurva. The more you train your eyes and mind to spot these, the better 🙂
          Good luck.

  168. parashurama v says:

    Hi,
    What if we get a Doji after bullish engulfing pattern, it means that there is a chance of greater upmove?

  169. Apurva Anil Kunkulol says:

    Hi Karthik,

    I am sharing an instance of what I think is a Dark cloud cover and think that it is a short call.
    Could you please share your thoughts on it?
    https://drive.google.com/file/d/1TYef8-TVrgz4NBiKNJPpl3FSUOTKv0_8/view?usp=sharing

    Thanks.
    Apurva

  170. Apurva Anil Kunkulol says:

    Hi Karthik,

    I have spotted what I think is a Dark Cloud Cover in the BajajAuto charts for just yesterday.
    I am unable to post a link of the screenshot here. However the OHLC data is as follows:

    O: 3194.9 H: 3194.95 L: 3070.00 C: 3096.70 V: 932K —> 12-Jul-2018
    O: 3078.00 H: 3174.95 L: 3057.05 C: 3161.60 V: 1.16 M —> 11-Jul-2018

    My opinion is that shorting can be done here.
    Could you share your thoughts on this?

    Thanks,
    Apurva

  171. Roshan says:

    Sir, does imfa forming bullish engulfing pattern on 17/7/18..

  172. Ritik says:

    Should I complete all modules in order to start trading in equities or can I start trading after completing till technical analysis part only in this varsity?
    Also,can you share your trading story?

  173. amandeep manhas says:

    what if in “bullish engulfing pattern” PR2 is red and engulfing PR1 (Also red)?..after looking this can we say ,this pattern is ostensibly bullish?….

    • Karthik Rangappa says:

      I’d see this as two strong bearish candles, Amandeep. Think about it, if P2 is bearish, then the stock opened lower, made a new high but was unable to sustain the high, hence closed lower again.

  174. Wasim Akram says:

    In the case of dark cloud cover.. Should P2 has to open above the P1 close price or it doesnt matter?

  175. Abhinav says:

    Hi Karthik,

    Thank you so much for giving so much insight on various different concepts. This is the first reading material I am going through and it’s really awesome. I am able to follow along pretty well. We truly appreciate your team’s efforts.

    I have a question (I have many but asking only one as of now 🙂 ):

    https://drive.google.com/file/d/1WinTF_ahNuQeubLSe05RxN_k26LqD-_g/view?usp=sharing

    In the above chart what could be the pattern, we can conclude for the UpTrend started where I highlighted in Yellow color. It’s definitely not Bullish Engulfing or Bullish Harami pattern.

    Is the UpTrend started here can be evaluated by any Multiple Candlestick pattern or by a Bullish Marubozu?

    Request you to please share your thoughts around this.

    Regards,
    Abhinav

    • Karthik Rangappa says:

      Thanks for the kind words, Abhinav 🙂

      As such, there is no solid candlestick pattern here which indicates a reversal. However, you could check for the following –

      1) Was it a solid support area, which was tested and the stock bounced back?
      2) Was there a double or triple bottom being formed?

  176. Ajinkya Sawrikar says:

    Hello there,
    Karthik can you take a look at the below attached screen shot of Cipla ( as on 24/08/2018) ?

  177. Ajinkya Sawrikar says:

    Hey Karthik, can you take a look at the following charts ?
    1.) Cipla – If I am not wrong a shooting star has been formed on 23-08-2018 and a red candle has been formed on the next day. Is it a good opportunity to short ? (link – https://drive.google.com/open?id=17MfiwxhXyqQjKaFS-8iifcRBjaUiVj8I)

    2.) UPL – A shooting star has been formed on 24-08-2018 if I am not wrong. So can I consider it as a shorting opportunity ? (link – https://drive.google.com/open?id=1-J0rjKbjSOAr87-E-KsEfXrOzq5mKm2A)

    • Karthik Rangappa says:

      1) That is a shooting star. You can combine both the candles and consider it as an engulfing pattern as well

      2) Yes, it is a shooting star. Please make sure the other variables are in place before you place a short order.

      • Ajinkya Sawrikar says:

        Previously I thought that technical analysis is very difficult (next to impossible) but thanks to you Karthik it is like a dream come true. Stock trading and markets is my passion and I am fortunate that I have such a good mentor. I appreciate your efforts, keep going 😉

  178. Rajat says:

    Is there any difference between a tweezer top and dark cloud pattern?

    • Karthik Rangappa says:

      I guess tweezer tops have a similar opening on P1 & P2, while DCC have a difference in the opening. Guess this is the only difference between the two patterns.

  179. Parijat Sinha says:

    want to understand the pattern formed by Yes Bank as on EOD 31.08.18. There is a gap formed with constant red candles

  180. Dhaval patil says:

    Sir,
    If a bullish engulfing pattern formed n on P3 red candle formed but upto the midline of green P2- is the pattern still valid??
    Refernece- Today’s YESBANK trade.

  181. Rajasekhar says:

    Hi Karthik ,

    As in 8.4 here , National Aluminum Co. Ltd (Nalco) formed the pattern (Doji after Bearish Engulfing) on 7thSept and took the Short position. But today I don’t see any major changes in the stock. Could you please confirm whether I followed correctly?

    Thx in advance

  182. Rakesh Hansalia says:

    However I’m in learning phase but I’ll keep this punch line in mind for lifetime – “Panic with uncertainty is the perfect recipe for a catastrophe”

    • Karthik Rangappa says:

      Always works, Rakesh. Human behavior does not change in markets 🙂

      • Rakesh Hansalia says:

        Karthik, I provided an email address while commenting but did not get notification such someone has reply or similar.

        Could you please confirm with technical writing team because it is really required. As of now what I’m doing, for example I asked a questions to you in 8 different chapters, and I’m sure you would have reply for all the questions but I need to go all chapters comment section and need to search with my name/query; and sometime it becomes tedious.

        Suggestion: User should get notification(if he/she provided and email id while commenting) when you or someone reply on his/her comment (as like Quora)

        -Thanks

        • Karthik Rangappa says:

          Rakesh, the problem is that there are many comments flowing into each chapter that at some point you will start getting irritated with all the notifications 🙂
          We stopped this of the same reason!

  183. Vinay Dangwal says:

    Sir,
    You said that for forming bullish or bearish englufing pattern we can see if whether real bodies are engulfed or not rather than just the whole body ,can this also apply on the piercing pattern and dark cloud cover

  184. sumit says:

    Hi Karthik,

    1. As you said in bearish engulfing, if there is a doji formation on 3rd day (P2) then there will be a long red candle and stock will be bearish for next few sessions.
    Ques- Is the same thing applies to bullish engulfing as well ??

    2. How to find the target of all the single and multiple candlestick patterns??
    Thankyou!

    • Karthik Rangappa says:

      Yup, it does. By the way, the presence of doji with candlestick is just my interpretation. You may want to double check this.

      For targets, you can always use the support and resistance techniques.

      • sumit says:

        Thanks for the reply!! 🙂
        I have 1 more doubt:
        I am seeing many charts, in multiple candlestick patterns chart, we can see single candlestick patterns as well..
        so my question is-
        In a chart what should be the priority? single or multiple candlestick pattern? which pattern we should look at first?

        As the charts are increasing, confusion is also increasing!
        2. Is there any priorities for the patterns?

  185. Srinathjayanna says:

    P2 open should be around equal to or low off p1 close.Is it ok if it has some gapup or gapdown of some % of opening and it forms engulfing pattern as it has formed in yesterday’s ITC stock.

  186. Srinathjayanna says:

    And even ioc after some 8-9 sessions of down trend it has formed bullish engulfing with excellent volumes can u please check these charts becoz I’m not able upload the charts here.

  187. Shailesh Kumar says:

    Is this type of chart can be drawn in Kite or Pi ? If yes then what should I select in type?

    • Karthik Rangappa says:

      I’d suggest you select the standard Candlestick charts.

      • Shailesh Kumar says:

        So in that case will I be able to see all the candles which are mentioned in above tutorial . I see in other comments section that they are able to identify engulfing pattern.

        I did not find any way to see two days chart at same level. Is that required some extra software ?

        • Karthik Rangappa says:

          No, Shailesh. Each candle is one day’s price action. So if you are looking at 2 candles, you are essentially looking at 2 day’s candle.

  188. Bhavin says:

    Hi..
    Understood the engulfing pattern. But which chart shall be considered to exercise the same?

  189. Chirag I Sharma says:

    Hi,

    In today’s Yes Bank 1 hour chart closing at 10:15, there was a Gap up but the shadow (low) engulfed the whole of friday’s 1 hour candle.

    Since the bull candle body opened with a gap up and the shadow engulfed the whole bearish candle, can I still call it a bullish engulfing? Or like you have shown in the example of bullish engulfing, the body should engulf the body?

    Hope you got my question.

  190. Shivam jaiswar says:

    Take a look at the chart below of Ambuja Cements. There are two bearish engulfing patterns formed. The first pattern on the chart (encircled, starting from left) did not work in favor of a risk taker. However the risk averse would have completely avoided taking the trade. The second bearish engulfing pattern would have been profitable for both the risk taker and the risk averse

    can you please explain these if it’s a bearish day how can it be in the favor of risk taker because he will be losing money.

  191. Harsha says:

    Hi karthik,

    For a bullish engulfing pattern/ bearish engulfing pattern, or whatever may be the pattern it is! You’ve said that if a recognizable signal occurs then one has to look for buying/shorting opportunities.

    My doubt here is: I’ve observed different candlestick patterns like 15 mins, 30 mins, 1 hr, 1 day, 1 week and 1 month candles. Each of them are conveying different signals i.e., 15 mins pattern is different from 1 hr ; 1 hr is different from 1 day ; 1 week is different from 1 month.

    I’m unable to decide which pattern would be applied to the stock during the intraday.

    If suppose I’m shorting a stock by looking at 15 mins chart, within half an hour or an hour the stock is reversing its direction and my stoploss got hit. This happened to me many times.

    Need some help from you! Any suggestions or corrections that I need to implement??

    • Karthik Rangappa says:

      1) Stick to 1 time frame and follow charts only from that time frame. For example if are looking at 15mins chart, then stick to just that. This will avoid a lot of confusion
      2) Try and look at longer term time frame – for example 15mins is better than 10 mins and EOD is better than hourly chart.

  192. Maaz Khan says:

    Hey Karthik,

    Once again, hats off to you and the entire Zerodha team. Teaching people about candlesticks, you guys are really lighting up the candle of knowledge in the dark, gloomy stock market arena.

    I have recently begun trading and it really seems very interesting, all thanks to varsity. I had a few queries about engulfing pattern, and I’d be obliged if you would answer.

    1. If P1 is a doji, or a star,and P2 engulfs in entirely but say, as a spinning top, then does this still qualify as an engulfing pattern? I am asking this since dojis and spinning tops indicate uncertainty in the markets.

    2. If say, P1 is not a doji, but P2 is a spinning top, then does this still mean that its a bullish engulfing pattern?

    • Karthik Rangappa says:

      Thanks, Maaz. Glad you liked the content here 🙂

      1) Ideally, the engulfing pattern has a longish candle on P1, and a P2 candle long enough to engulf P1. Any variations to this should be treated with a pinch of salt
      2) I’d ignore this.

  193. Sanjeev Malik says:

    Hi,

    As you have mentioned, for the bullish engulfing pattern (or bearish) or other above mentioned multiple candlestick patterns, it is worth to be risk taker than risk-averse and thus trade (take action) on P2.
    But you have also mentioned the likelihood of doji formation and thus forming even powerful combo to cash on the opportunity. This we can only identify if we wait till EOD P3 and behave as risk-averse.
    So, what is the right way? Which is more helpful and which one average out (longer run) to be better?

    P.S: I am still going through the modules and just reached here sequentially.

    • Karthik Rangappa says:

      Well, the occurrence of doji or spinning top will not be known until it happens. So if you are a risk taker, the best bet is to take up the trade, if doji, then probably increase the stakes. But do remember, doing so will also increase your exposure to risk, so you need to be within your limits.

  194. Abhijeet Saha says:

    well i cant see any of the screenshots shared by others in the comment post to analyze the particular trade they are discussing about.

  195. Rahul says:

    Quick question on Engulfing patterns, is it necessary for P1 to be bullish and P2 to be bearish or vice-versa? What if in a bullish trending market we see two red candlesticks with P2 candlestick engulfing P1? Does situation like these occur (given that P2’s opening will be higher than P1’s opening and (goes without saying) P1’s closing?

    • Karthik Rangappa says:

      That fine too, Rahul. The idea is to ensure that that P2’s price either erodes all the gains (bearish) or recovers all the loses ( bullish). The point is to look at the price action and not really textbook defined patterns.

  196. Gaurav says:

    Hi Karthik

    In idea vodafone chart, with a formation of doji and spinning tops there was downtrend in the price, yesterday with a increase in volumes there was a bullish engulfing pattern forming , can you please look into it? whether i am interpreting it in a correct manner?

    • Karthik Rangappa says:

      It does appear to be a bullish engulfing pattern, however, I’d be cautious with bullish strategies around this stock given the fundamentals.

      • Gaurav says:

        Thanks for replying Karthik Sir. The modules on technical and fundamental analysis as well as options are pretty good. One who doesnot have any knowledge, should definitely refer to it.

        Sir one my friend has invested in vodafone idea, for the purpose of rights issue, like playing it as a special situation, should one hedge the position or keep it unhedge (average buying price 17.5) . what are your views regarding?

        • Karthik Rangappa says:

          Hedging may not be very effective in this case, Gaurav. Btw, the right issue window is over right?

          • Gaurav says:

            The rights issue starts on April 10 and issue closes on April 24. He purchased the shares before Ex-date at 29.3 and is still holding. the rights issue price is 12.5. after applying for shares at 12.5 the average buying price turns out to be somewhere near 17.5, that is for the shares previously purchased and rights shares. so if he hedges buy shorting one lot of futures he is locking in the price which is currently 15.7

  197. Benny Thadikaran says:

    Hi Kartik,

    You’ve shown examples of how the piercing pattern works similar to the bullish engulfing. Can this work in reverse like a bearish engulfing? Example in an uptrend, does a piercing pattern indicate a possible downward trend reversal?

  198. AK says:

    Hello Karthik,

    As said examples are daily candlestick or 15mins? If it’s 15mins then how can we identify Bullish/Bearish engulfing?
    Confused the time frame of candlesticks in the above said examples whether its daily,15min,1hour… As you were mentioned Day1 P1,Day2 P2 candlestick etc

    Thanks,
    AK

    • Karthik Rangappa says:

      The candlestick pattern works across all time frames and assets. For example, if you are looking at the bullish engulfing pattern, then the previous 15 min candle is referred to as P1 and the current 15 candle (engulfing P1), becomes P2.

  199. Srujan says:

    It would be very helpful if there are any videos explaining this content as it helps in understanding it as someone explaining this. Incase if there are any please let me know

  200. Dan says:

    Hi
    I saw few academic article that show that candles doesn’t work in predicted next stock price. Did u hear about this? And if so maybe u have to say about it..

  201. Srinivas says:

    Dear Kartik,

    Please explain why during ‘Bearish Engulfing Pattern’ Stop Loss is set at High of P1 and P2….couldnt understand the concept.

    For example if I already own a few shares of a company I would have already set my Target price and Stop Loss right? Like if I would have bought a share at 100 and I expect it to go to 105 which is my Target and I would have already set my Stop Loss at say 95. If already all these values are set…..then I could not understand the above said concept. Please explain.

    Thanks,
    Srinivas

    • Srinivas says:

      In continuation to the above comment…..Stop Loss is something which would help us arrest our losses during a fall right? but why are we setting a Stop Loss that is above the current market price and limiting our profits?

    • Karthik Rangappa says:

      Srinivas, the Bearish engulfing pattern suggests you short the stock, hence the SL is higher than the entry price.

  202. Vikas Aswani says:

    Hey Karthik, is bullish/bearish engulfing pattern works on 15 min charts for intraday?

  203. Satish says:

    Hello Sir,
    Sir I want to know how to identify difference in tripple top and upward rise flag pole pattern….

    • Karthik Rangappa says:

      The flag pattern can be identified by an upward sloping trend. This may not be true with the triple/double top formation.

  204. Satish says:

    Ok thank u sir for your reply…
    But sir can i know how should volume must behave for both flag pole and triple top/bottom for strong confirmation..
    And sir do volume really help for breakout?

    • Karthik Rangappa says:

      The volume should be on the higher side, especially on the day you initiate the trade. If you are looking at a flag formation, then the decline (after the rapid increase) should be on lower volume.

  205. Yogesh Verma says:

    Karthik Sir, do these pattern work in shorter sessions like a 1 Hr, 30min, 15min or even shorter ones?
    Li

    • Karthik Rangappa says:

      Yes, Yogesh. CS patters are applicable across all time frames and assets. However, do make sure you check the checklist before initiating the trade.

  206. Yogesh Verma says:

    Sir, in case of Dark Cloud how substantial should be the uptrend? will the dark cloud pattern appearing after 3-4 days of uptrend be reliable enough provided such uptrend of 3-4 days was after a significant downtrend.

    • Karthik Rangappa says:

      It is hard to give you a definite answer. However, to give you a perspective, if SBI created a DCC with prior trend lasting for 8 trading session and at the same time ICIC too formed a DCC with prior trend lasting 3-4 sessions, then I’d bet on SBI.

  207. Satish says:

    Sir is it correctly drawn flag pole pattern in crude oil ……it is current day market chart…
    https://drive.google.com/file/d/1tqGWLR9h2FxdTfdpbFYrgTUkRyLOZ4P5/view?usp=drivesdk
    Sir plz suggest and correct if wrong…

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