Lesson 5: Different Dual Candlestick Patterns

In the previous lesson, you've learned the basics of a single candlestick pattern. Let's review:

• A single candlestick pattern signifies that the market should have a single candle to confirm the signal.  
• The popular single candlestick patterns are the doji, shooting star, hammer, inverted hammer, and hanging man candlesticks.

Let's look at the other type of candlestick pattern in this lesson – the dual candlestick pattern.  

Lesson Overview

• Dual candlestick patterns require two significant candle formations to confirm the reversal signal.  
• Among the dual candlestick pattern types are the bullish engulfing, bearish engulfing, tweezer tops, and tweezer bottoms patterns.  

Single Vs. Dual Candlestick Patterns

Also known as the double candlestick pattern, the dual candlestick pattern requires two candles to confirm the signal.  

Basically, two significant candles should form within the pattern to predict the future price movement.  

Engulfing Candles

An engulfing candle suggests trend reversal. As the name suggests, one candle engulfs the other one. If you want to view it from a different perspective, imagine it as if the second candle is eating the first one.  

There are two types of engulfing candles that form in your price chart – the bullish engulfing and the bearish engulfing.  

Bullish Engulfing Candle

When a bearish candle from the bearish trend is followed by a larger bullish candle, you're probably likely looking at a bullish engulfing candle.  

The formation of this pattern signals that the market will potentially have a strong bullish trend at the end of a bearish market or market indecision.  

Bearish Engulfing Candle

A bearish engulfing pattern is the counterpart of the latter. It forms at the peak of a bullish market and suggests a potential bearish reversal.  

The reason behind the formation of this pattern is the immense selling pressure amidst the ongoing bearish trend.  

This pattern forms a bullish candle at the peak of an uptrend and is followed by a larger bearish candle to signify the entry of the sellers.

Tweezer Bottoms and Tweezer Tops

The tweezer bottoms and tweezer tops are found in an extended or pronounced market trend.  

When the market forms these patterns, it creates both bearish and bullish candles with shadows that extend at the same levels. If you're imagining it, you should be seeing tweezer-looking candles.

Tweezer Bottoms

The tweezer bottoms can be found at the bottom of a bearish market.

The first candle that forms this pattern should always be bearish—it represents the last push of the sellers before the market becomes bullish.  

On the flip side, the second candle should be bullish to indicate that bulls are now in control of the market after the long bearish trend.  

The upper shadows of both candles should be at a similar level or at least close to one another.  

Tweezer Tops

Tweezer Tops is a bearish reversal pattern found at the top of a bullish market. Like its bottom counterpart, this pattern also consists of two candles:

• First Candle: The bullish candle at the end of an uptrend represents the final push of the buyers. This candle indicates that the market is still under buying pressure.
• Second Candle: The second candle is bearish to show that the sellers have taken control of the market. This candle suggests a potential reversal as the market shifts from bullish to bearish.
• Both candles should have similar or nearly identical upper shadows to indicate that the market faced resistance at the same level in both periods.  

This pattern signals that the intervention of the sellers amidst the ongoing buying pressure would lead to a price decline.  

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