Visual Candle Glossary Visual Candle Glossary The descriptions and illustrations below explain and show ideal examples of what the pattern should be like. These "ideal" patterns rarely unfold; therefore, use this glossary as a guidepost, since some subjectivity is required. Abandoned baby—A very rare top or bottom reversal signal. It is comprised of a doji star that gaps away (including shadows) from the prior and following sessions' candlesticks. This is the same as a Western island top or bottom in which the island session is also a doji. Advance block—A variation of the three white soldiers in which the last two soldiers (i.e., white real bodies) display weakening upside drive. This weakness could be in the form of tall upper shadows or progressively smaller real bodies. It signifies a diminution of buying force or an increase in selling pressure. Bearish belt-hold—See Belt-hold lines. Bearish engulfing pattern—See Engulfing patterns. Belt-hold lines—There are bullish and bearish belt-holds. A bullish belt-hold is a tall white candlestick that opens on/ or near, its low and closes well above the opening price. It is also called a white opening shaven bottom. A bearish belt-hold is a long black candlestick that opens on, or near, its high and closes well off its open. Also referred to as a black opening shaven head. Box range—The Japanese expression for a market in a horizontal trading range. Bullish belt-hold—See Belt-hold lines. Bullish engulfing pattern—See Engulfing patterns. file:///C|/My%20Documents/00-Websites/version2/about-glossary_for_pdf.htm (1 of 10) [5/30/2003 5:56:28 PM] Visual Candle Glossary Candlestick lines and charts—Traditional Japanese charts whose individual lines look like candles, hence their name. Candlestick charts are also called "candle charts." The candlestick line is comprised of a real body and shadows. See Real body and Shadows. Counterattack lines—Following a black (white) candle in a downtrend (up trend), the market gaps sharply lower (higher) on the opening and then closes unchanged from the prior session's close. A pattern that reflects a stalemate between the bulls and bears and thus lessens the force in place before the emergence of the counterattack line. Dark-cloud cover—A bearish reversal signal. In an up trend a long white candlestick is followed by a black candlestick that opens above the prior white candlestick's high (or close) and then closes well into the white candlestick's real body— preferably more than halfway. The bullish counterpart of the dark-cloud cover is the piercing pattern. Dead cross—A bearish signal given when a short-term moving average crosses under a longer-term moving average. Its bullish counterpart is the golden cross. Deliberation pattern—See Stalled pattern. Doji—A session in which the open and close are the same (or almost the same). There are different varieties of doji lines (see Gravestone, Dragonfly, and Long- legged doji) depending on where the opening and closing are in relation to the entire range. Doji lines are among the most important individual candlestick lines. They are also components of candlestick patterns. Northern doji are doji that appear during a rally. Southern doji are doji during declines. file:///C|/My%20Documents/00-Websites/version2/about-glossary_for_pdf.htm (2 of 10) [5/30/2003 5:56:28 PM] Visual Candle Glossary Doji star—A doji that gaps from a long white or black candle's real body. Downside gap tasuki—See Tasuki gaps. Dragonfly doji— A doji with a long lower shadow and where the open, high, and close are at the session's high. See the illustration under Doji. The opposite version of this is the gravestone doji. Dumpling tops—Similar to the Western rounding top. A window to the downside is needed to confirm this as a top. Its bullish opposite is the fryingpan bottom. Engulfing patterns—A bullish engulfing pattern is comprised of a large white real body that engulfs a small black real body in a downtrend. A bearish engulfing pattern occurs when selling pressure overwhelms buying force as reflected by a long black real body engulfing a small white real body in an up trend. Evening doji star—See Evening star. Evening star—A top reversal pattern formed by three candle lines. The first is a tall white real body, the second is a small real body (white or black) that gaps above the first real body to form a star, and the third is a black candle that closes well into the first session's white real body. If the middle portion of this pattern is a doji instead of a spinning top, it is an evening doji star. The opposite of the evening star is the morning star pattern. file:///C|/My%20Documents/00-Websites/version2/about-glossary_for_pdf.htm (3 of 10) [5/30/2003 5:56:28 PM] Visual Candle Glossary Falling three methods—See Three methods. Falling window—See Windows. Frypan bottom—Similar to a Western rounding bottom. A window to the upside confirms this pattern. It is the counterpart of the dumpling top. Gapping plays—There are two kinds of gapping plays: 1. High-price gapping play—After a sharp advance, the market consolidates via a series of small real bodies near the recent highs. If prices gap above this consolidation area, it becomes a high-price gapping play. 2. Low-price gapping play—After a sharp price decline, the market consolidates via a series of small real bodies near the recent lows. If prices gap under this consolidation, it is a sell signal. Golden cross—A bullish signal in which a shorter-term moving average crosses above a longer-term moving average. It is the opposite of the dead cross. Gravestone doji—A doji in which the opening and closing are at the low of the session. It is a reversal signal at tops. See the illustration under Doji. The opposite of this doji is the dragonfly doji. Hammer—An important bottoming candlestick line. The hammer and the hanging man are both the same lines that are generally called umbrella lines; that is, a small real body (white or black) at the top of the session's range and a very long lower shadow with little or no upper shadow. When this line appears during a downtrend, it becomes a bullish hammer. For a classic hammer, the lower shadow should be at least twice the height of the real body. Hanging man—A top reversal that requires confirmation. The hanging man and the hammer are both the same type of candlestick line (i.e., a small real body [white or black], with little or no upper shadow, at the top of the session's range and a very long lower shadow). But when this line appears during an up trend, it becomes a bearish hanging man. It signals the market has become vulnerable, but there should be bearish confirmation the next session with an open, and better is a close, under the hanging man's real body. In principle, the hanging man's lower shadow should be two or three times the height of the real body. file:///C|/My%20Documents/00-Websites/version2/about-glossary_for_pdf.htm (4 of 10) [5/30/2003 5:56:28 PM] Visual Candle Glossary Harami—A two-candlestick pattern in which a small real body holds within the prior session's unusually large real body. The harami implies the immediately preceding trend is concluded, and the bulls and bears are now in a state of truce. The color of the second real body can be white or black. Most often the second real body is the opposite color of the first real body. Harami cross—A harami with a doji on the second session instead of a small real body. An important top (bottom) reversal signal especially after a tall white (black) candlestick line. It is also called a petrifying pattern. High-price gapping play—See Gapping plays. High-wave candle—A candle with very long upper and lower shadows and a small real body. It shows that the market is losing its direction bias that it had before this candle appeared. If the real body is a doji instead of a small real body it is a long-legged doji. In-neck line—A small white candlestick in a downtrend whose close is slightly above the previous black candlestick's low of the session. After this white candlestick's low is broken, the downtrend should continue. Compare to on-neck line, thrusting line, and piercing pattern. Inverted hammer—Following a downtrend, this is a candlestick line that has a long upper shadow and a small real body at the lower end of the session. There should be no, or very little, lower shadow. It has the same shape as the bearish shooting star, but when this line occurs in a downtrend, it is a bullish bottom reversal signal with confirmation the next session (i.e., a candlestick with a higher open and especially a higher close compared to the inverted hammer's close). Inverted three Buddha pattern—See Three Buddha pattern. Long-legged doji—A doji with very long shadows. If the opening and closing of a long-legged doji session are in the middle of the session's range, the line is called a Rickshaw man. See illustration under Doji. Low-price gapping play—See Gapping plays. Lower shadow—See Shadows. file:///C|/My%20Documents/00-Websites/version2/about-glossary_for_pdf.htm (5 of 10) [5/30/2003 5:56:28 PM] Visual Candle Glossary Morning attack—The Japanese expression for a large buy or sell order on the opening that is designed to significantly move the market.