Candlestick patterns are made up of one or more candlesticks and can be blended to form one candlestick. This blended candlestick captures the essence of the pattern and can be formed using the following:
- The open of the first candlestick
- The close of the last candlestick
- The high and low of the pattern
A Bullish Engulfing pattern blends into a hammer, and a Bearish Engulfing pattern blends into a shooting star.
By using the open of the first candlestick, close of the second candlestick, and high/low of the pattern, a Bullish Engulfing Pattern or Piercing Pattern blends into a Hammer. The long lower shadow of the Hammer signals a potential bullish reversal. As with the Hammer, the Bullish Engulfing Pattern and Piercing Pattern require bullish confirmation.
Blending a Piercing Pattern results in a Hammer, and a Blending Dark Cloud Cover results in a Shooting Star.
Blending the candlesticks of a Bearish Engulfing Pattern or Dark Cloud Cover Pattern creates a Shooting Star. The long, upper shadow of the Shooting Star indicates a potential bearish reversal. As with the Shooting Star, Bearish Engulfing, and Dark Cloud Cover Patterns require bearish confirmation.
Blending Three White Soldiers results in a long white candlestick and blending Three Black Crows results in a long black candlestick.
More than two candlesticks can be blended using the same guidelines: open from the first, close from the last, and high/low of the pattern. Blending Three White Soldiers creates a long white candlestick and blending Three Black Crows creates a long black candlestick.
