Reversal Candlestick Patterns: Top Bullish & Bearish Reversal Candles

2025.09.23 2025.09.23
Reversal Candlestick Patterns: Bullish and Bearish Reversal Candles

Alan Tsagaraevhttps://www.litefinance.org/blog/authors/alan-tsagaraev/

Candlestick reversal patterns are important harbingers or rend reversals. These technical analysis tools can be used to predict price changes. These patterns form on an asset’s price chart and, depending on their type and shape, indicate potential upward or downward movement.

These patterns during bullish or bearish reversals can help you make more informed trading decisions. This article explores the most significant bullish and bearish candlestick reversal patterns in detail, describing their characteristics and how to use these patterns and interpret them.

Major Takeaways

• A candlestick reversal pattern is a graphical formation that indicates a high probability of a reversal of the current trend.
• A reversal pattern can be identified by distinctive candlestick clusters and high trading volume, confirming a trend reversal, which is characterized by an increase in volume upon a breakout of key levels.
• Reversal candlesticks signal a change in the trend, while continuation patterns indicate its strengthening. The difference between them lies in their shape, volume, and market context.
• Reversal patterns appear on a price chart due to the exhaustion of bullish or bearish demand, profit-taking by large market participants, and fundamental factors.
• Trading reversal patterns involves opening a position after the signal is confirmed. A stop-loss order is placed beyond the reversal pattern.
• Trading strategies rely on indicator signals, filtering out false signals, and using other chart patterns.
• The advantages include the ability to open positions at the very beginning of a new trend. The disadvantages are the possibility of false signals and the need for confirmation using other technical analysis tools.
• Reversal patterns can be found on various time frames and in different markets. However, candlesticks give the most reliable signals on longer time frames (daily, weekly) and in highly volatile markets.

What Is a Reversal Candlestick Pattern?

A candlestick reversal pattern is a formation on a price chart that signals a shift in the direction of the current trend. Candlestick patterns can comprise one or several candlesticks.

Traders use these patterns to predict bullish and bearish reversals. They allow them to close a position or open a new one in a timely manner and profit from the trend reversal. However, it is important to confirm the pattern with technical indicators.

Bullish vs. Bearish Reversal Candles

Bullish or bearish formations are key tools for forecasting price movements in financial markets. A bullish pattern signals a potential bullish trend and indicates the dominance of buyers.

A bearish formation, on the other hand, suggests a decline in prices and a potential bearish reversal, reflecting increasing pressure from sellers.

Bullish Reversal Patterns

Bullish candle reversal patterns signal potential price growth following a decline. These structures show that selling pressure is fading and an upward reversal is likely. Recognizing and interpreting candlestick patterns is a must-have skill for successful investors.

Let’s take a look at the most popular patterns.

Hammer Pattern

A Hammer pattern has a small body at the top of the candlestick and a long lower shadow that far exceeds the size of the body. The Hammer shows that sellers exerted significant downward pressure on the price during the trading session, but buyers ultimately managed to gain the upper hand and push the price back to its previous level.

When a Hammer emerges, a long position is usually opened after confirmation of this reversal pattern, when the next candlestick closes above the Hammer’s high. A stop-loss can be set below the pattern’s low, and a take-profit order depends on resistance levels and expected profit.

Morning Star Pattern

A Morning Star is a reliable sign of an upward trend reversal. It consists of three candlesticks:

• a large bearish candlestick;

• a small candlestick with a downward gap;

• a tall bullish candlestick, which may close above the body of the first bearish candlestick.

As a rule, after this pattern is formed, traders wait for confirmation to enter a long position. A stop loss is placed below the Morning Star’s low, and a take profit is determined by support and resistance levels.

Morning Doji Star

The Morning Star Doji formation is a signal of a looming bullish reversal after a decline. It consists of three elements:

A long position can be opened only after the third candlestick is fully formed. A stop-loss order is set slightly below the Doji’s low. The nearest resistance levels are used as targets, and you can also use a risk/reward ratio of 1:2 or higher.

Bullish Engulfing Pattern

A Bullish Engulfing is a two-candlestick pattern that signals a potential reversal of a downtrend. The candlestick begins with a bearish candlestick followed by a large bullish candlestick that completely engulfs the previous one.

Trading the Bullish Engulfing candlestick pattern requires confirmation signals, such as other reversal signals or increased trading volume. You can enter the market once the price exceeds the high of the bullish candlestick. As a rule, a stop-loss order is placed below the low of the bullish candlestick, while a take-profit is determined by resistance levels calculated using Fibonacci ratios or other tools.

Piercing Line

A Piercing Line is a bullish reversal candle pattern that occurs after a downtrend. It consists of two candlesticks: a long bearish candlestick and a long bullish candlestick. The second candlestick should open with a down gap, but then the price rises significantly and closes above 50% of the body of the previous bearish candlestick.

An increase in trading volume or other bullish signals can also serve as confirmation of a looming reversal. A stop loss is placed below the low of the second candlestick, and a take profit is placed at the nearest resistance level. Notably, this pattern is most effective in downtrends.

Bullish Harami Pattern

Bullish Harami is a Japanese candlestick pattern that signals the likely start of an uptrend. After a long bearish candlestick, a small bullish candlestick appears.

To trade Bullish Harami, you need to confirm the pattern with signals generated by technical indicators. A stop-loss is set below the low of the bearish candlestick, and a take-profit is calculated based on resistance levels or risk/reward ratio.

Bullish Harami Cross

A Bullish Harami Cross pattern signals an upward reversal. First, a small cross-shaped Doji candlestick forms within the body of the preceding large bearish candlestick. This setup indicates a fading bearish trend.

When the second candlestick closes above the high of the first one, it serves as confirmation of the pattern’s signal. Place a stop loss below the low of a Doji candle and a take profit at resistance levels. Remember to consider trading volume and the broader market context.

Bullish Abandoned Baby Pattern

The Bullish Abandoned Baby pattern consists of three candlesticks:

• a long black candlestick (bearish);

• a gap down and a small Doji candlestick , which does not cross the previous candlestick’s body;

• a gap up after the Doji candle and a bullish candlestick confirming a trend reversal.

To trade this pattern, wait for it to complete. A bullish confirmation of the signal is a breakout of the last bullish candlestick’s high. A stop-loss order is set below the low of the Doji. A take-profit order is defined by analyzing the previous downtrend and resistance levels.

Inverted Hammer

An Inverted Hammer is a bullish reversal pattern that signals a possible termination of a downtrend. It represents a single candlestick with a small body at the bottom and a long upper shadow. The lower shadow should be minimal or absent.

After the appearance of the Inverted Hammer, wait for a confirming signal in the form of the next candlestick closing above the body of the Hammer. A stop-loss order can be placed below the Hammer’s low, and a take-profit order is set at resistance levels or using the risk/reward ratio. The effectiveness of the pattern increases when other technical analysis tools are employed.

Dragonfly Doji

A Dragonfly Doji reversal candlestick pattern appears in downtrends. It has a tiny body with almost the same opening and closing prices, as well as a long lower shadow. The Doji body should be minimal or absent.

It is necessary to wait for a confirmation signal after the pattern appears – a bullish candlestick that will close above the Doji high. A stop order is placed below the Doji low. A take profit can be placed at the nearest resistance level, or you can use a 1:2 risk/reward ratio as a benchmark.

Tweezer Bottom

A Tweezer Bottom pattern is a reversal formation that emerges at the end of a bearish trend. The pattern consists of two candlesticks with nearly identical lows. The first candlestick is usually bearish, while the second is bullish, reflecting the strength of buyers.

It is recommended to open trades after confirmation of the reversal, for example, when the price consolidates above the pattern’s high. A stop loss can be placed below the pattern’s low.

Bearish Reversal Candlestick Patterns

Bearish reversal patterns on candlestick charts can signal a decline in the value of an asset. They indicate a bearish reversal after an uptrend. These patterns can be employed to close long positions and open short positions in time to minimize losses and increase potential profits.

Shooting Star

A Shooting Star pattern signals a possible downward reversal after an upward trend. It represents a candlestick with a short body and a long upper shadow, which is twice the length of the body. The lower shadow is either very small or absent.

When trading a Shooting Star, additional bearish confirmation is required. Wait until the next candlestick closes below the body of the Star. Open a sell trade when the price breaches the low of the confirming candlestick. A stop-loss order should be placed above the high of the Shooting Star. When setting a take-profit order, consider support levels and the risk-to-reward ratio. The effectiveness of the pattern increases when additional technical analysis tools are used.

Evening Star

An Evening Star indicates an impending downward trend reversal. The pattern consists of three candlesticks:

• the first candlestick is ascending;

• the second one has a small body;

• the final candlestick is descending.

Open a short position when the price falls below the closing price of the third candlestick. A stop-loss order should be set slightly above the high of the second candlestick. A take-profit can be set at the key support levels.

Evening Doji Star

An Evening Star Doji is an extension of an Evening Star pattern. The difference is that the central candlestick, or a Star, is shaped like a doji. Its very narrow body reflects uncertainty and a possible trend reversal.

When trading this pattern, wait until all three candles fully form. Open a sell trade when the price falls below the third candlestick’s closing level. Place a stop-loss order slightly above the high of the Doji star. You can determine a take-profit level based on support levels or the risk-to-reward ratio. This candlestick pattern indicates strong selling pressure after a rise in quotes.

Hanging Man

A Hanging Man pattern signals a bearish trend reversal. On the chart, the pattern consists of a single candlestick with a small body, a long lower shadow, and almost no upper shadow.

Trading the Hanging Man pattern requires careful analysis. It is important to make sure that the next candlestick closes below the body of the pattern. A stop-loss order is placed just above the high of the Hanging Man. Refer to support levels when setting your take-profit order. This pattern suggests that the bullish trend is losing steam.

Dark Cloud Cover

The Dark Cloud Cover pattern signals that an uptrend is reversing, and a downtrend is likely to start. The pattern consists of two candlesticks: a large bullish candlestick followed by a large bearish candlestick. The bearish candlestick opens above the high of the previous candlestick but closes below the middle of its body.

It is necessary to wait for both candlesticks to form completely. A short position can be opened after the price falls below the low of the bearish candlestick. A stop loss should be placed above the high.

The pattern suggests that sellers are gaining the upper hand, potentially signaling the onset of a bearish trend.

Bearish Engulfing Pattern

A Bearish Engulfing candlestick signals the end of price growth. The pattern is formed by two candlesticks – a small bullish one and a larger bearish one. Notably, the body of the second bearish candlestick should completely overlap the body of the first one.

Before opening trades, make sure that the Bearish Engulfing pattern has been completed. Open a short position below the low of the bearish candlestick, with a stop loss placed above the candle’s high. Place a take profit at key support levels.

Bearish Harami

A Bearish Harami pattern signals a downward trend reversal. The pattern consists of a long white candlestick (bullish), followed by a short black candlestick (bearish). The body of the second candle is located within the body of the previous one, implying that a bullish trend is fading.

A trading strategy suggests waiting for both candlesticks to emerge on the chart. A short position is opened when the price settles below the low of the small bearish candlestick. A stop loss should be placed above the high of the first bullish candlestick. The profit target is determined by support levels or the risk/reward ratio. The Harami pattern is considered less reliable than a Bullish Engulfing, so it requires confirmation by other technical analysis tools.

Bearish Harami Cross

A Bearish Harami Cross is a bearish reversal pattern, similar to Bearish Harami, but with the second candlestick being a Doji. It consists of a long bullish candlestick followed by the second Doji candlestick, forming within the body of the first one. This indicates a high degree of uncertainty and a possible weakening of the uptrend.

Once this pattern appears, wait for a confirming signal, such as another bearish candlestick. Open a short position when the price falls below the low of the Doji, with a stop loss above the high of the bullish candlestick. This pattern generates a more reliable signal than a regular Harami.

Three Black Crows

Three Black Crows is a trend reversal pattern that displays strong bearish momentum. The pattern consists of three consecutive red candlesticks, each opening within the body of the previous one and closing at a new low. The candlestick bodies are usually large, while the shadows are small.

The pattern indicates that sellers dominate the market. You can open short trades once the third candlestick is formed, placing a stop-loss above the high of the first candlestick. When setting a take-profit, rely on support levels or the risk/reward ratio. Do not trade against the primary trend, and always look for additional confirming signals from technical indicators.

Bearish Abandoned Baby

A Bearish Abandoned Baby is a rare but powerful pattern, signaling an impending decline in prices. The pattern consists of three candlesticks:

On the chart below, the Abandoned Baby appeared between two bullish candlesticks, mirroring market volatility. However, the price gaps between the Doji and the bullish candlesticks indicate a weakening bullish trend.

A short position can be opened below the low of the bearish candlestick. A stop-loss order should be set above the high of the Doji. A take-profit order is set at support levels or using the risk/reward ratio. Given that the pattern is extremely rare, it is necessary to carefully analyze the market and confirm the signal with other technical tools.

Tweezer Top

A Tweezer Top pattern gives a downward reversal signal. It is formed by two adjacent candlesticks. The first candlestick reflects bullish market sentiment, while the second shows bearish sentiment, with their maximum values almost coinciding, resulting in a tweezer-like shape formed by their shadows. The pattern indicates an unsuccessful attempt by buyers to push the price higher.

After the pattern appears, it is necessary to wait for confirmation, such as a bearish candlestick that closes below the midpoint of the first candlestick. It is recommended to enter a short trade below the low of the second candlestick. A stop loss is set slightly above the high of the Tweezers. You can lock in profits at the key support level.

Difference Between Reversal and Correction

A reversal marks a shift in the primary trend. For example, the growth in quotes gradually weakens, and large sales orders appear at key resistance levels, leading to a steady decline. As a rule, a trend reversal is accompanied by a significant increase in trading volume.

A correction is a temporary price movement against the existing trend. Generally, after the correction ends, the price continues to move in the direction of the main trend. During such pullbacks, you can open trades at attractive prices and lock in profits once the price continues to move in line with its trend. During a correction, trading volume increases slightly.

It is important to distinguish between corrections and reversals in order to avoid prematurely closing a profitable position opened in the direction of the trend. Fibonacci ratios are often used to predict potential short-term reversals.

How to Use Reversal Candlestick Patterns

Candlestick reversal patterns help traders identify likely trend reversal points.

• Longer time frames (daily, weekly) generate more reliable signals from candlesticks than shorter ones (minute, hourly).

• Place a stop-loss order above/below the formation (depending on the trend) to limit potential losses.

• Set take-profit orders at key resistance/support levels or apply a predetermined risk-to-reward ratio (e.g., 1 to 2 or 1 to 3).

• Consider the overall market situation and the strength of the trend before making trading decisions. A reversal pattern in a strong trend may only point to a short-term correction.

• Use these patterns in combination with several reversal patterns to strengthen the signal.

Remember that no pattern guarantees a profit. Always follow the rules of risk management.

Are Reversal Candles Reliable?

Candlestick reversal patterns can be a powerful indicator for assessing a potential trend reversal. However, one should not rely solely on them.

Advantages of candlestick patterns:

• They can warn of a possible strong reversal even before other indicators confirm it.

• They are easy to spot on a chart.

• They reflect the struggle between buyers and sellers.

Limitations of candlestick patterns:

• They often generate false signals, especially on short-term time frames and in volatile markets.

• Pattern recognition can be subjective, leading to different interpretations.

• Patterns alone do not reveal the strength of a new trend or key levels.

Conclusion

Reversal patterns on candlestick charts are valuable because they allow traders to identify possible trend reversals. Recognizing and correctly interpreting the main bullish and bearish patterns can enhance your trading performance.

However, remember that candlestick patterns do not guarantee profits. They are most effective when used in conjunction with other technical analysis methods and when the current market situation is considered.

Open a LiteFinance demo account and try trading with reversal patterns. With practice, you will be able to successfully use these patterns in live trading.