Patterns worth knowing

Summary

A few candle patterns come up again and again. An engulfing candle has a body that fully covers the body before it, showing a sudden change of control. A doji opens and closes at almost the same price: indecision. A hammer has a small body near the top and a long lower wick: sellers pushed down, buyers pushed back. None of them works on its own; they matter most at levels where the price has turned before.

Key points

• Engulfing: one body fully covers the previous one.
• Doji: open and close almost equal, a sign of indecision.
• Patterns matter most at levels where the price has turned before.

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What is a doji?

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