Double candlestick patterns are powerful visual signals used in technical analysis to identify potential market reversals. Formed by two consecutive candlesticks, these patterns offer valuable insights into shifts in buying and selling pressure. At PlexyTrade, we empower traders with the knowledge to recognise and interpret these formations, helping them anticipate changes in trend direction and make well-timed decisions. Whether you’re looking for early reversal signs or confirmation of weakening momentum, understanding double candlestick patterns can refine your trading strategies across various market conditions.
What Does a Double Candlestick Mean?
In the world of technical analysis, double candlestick patterns are vital tools that help traders spot potential market reversals. These formations are made up of two consecutive candlesticks and serve as strong indicators of shifting sentiment between buyers and sellers. Recognising these patterns can help traders anticipate upcoming trend changes and position themselves accordingly.
At PlexyTrade, we emphasise understanding such formations as part of a data-driven trading strategy that strengthens both timing and risk management.
How Is a Double Candlestick Pattern Structured?
Double candlestick patterns are shaped by two back-to-back candles, each reflecting a shift in market momentum. Here are some key structures:
Morning Star
Although traditionally part of triple candlestick patterns, traders often associate Morning Star reversals with two-part formations when viewed in simplified form. Typically, it features:
- A long bearish (red) candle
- A small-bodied candle (indicating indecision)
- A bullish (green) candle confirming a reversal
This pattern appears at the end of a downtrend and suggests growing buyer strength. At PlexyTrade, we recommend waiting for the final bullish candle as confirmation before taking action.
Evening Star
The Evening Star works in reverse. It begins with:
- A long bullish (green) candle
- A small-bodied candle indicates hesitation
- A long bearish (red) candle showing renewed selling pressure
Forming near the top of an uptrend, this pattern warns of weakening bullish momentum and a possible reversal to the downside.
How to Use Double Candlestick Patterns in Technical Analysis?
- Recognise the Pattern
The first step is identifying key combinations like the Bullish Engulfing (where a large green candle fully covers the previous red one) or Bearish Engulfing (a large red candle engulfs a smaller green one). These are classic double candlestick signals often seen near reversal zones. - Time Your Trade Wisely
At PlexyTrade, we stress the importance of timing. Don’t act on the first candle alone—wait for the full pattern to form. In a bullish setup, entering after the second bullish candle closes often improves trade accuracy. Setups confirmed with support or resistance zones tend to be more reliable. - Use Supporting Indicators
To strengthen confidence, pair candlestick patterns with technical indicators:- RSI: If the RSI is rising from oversold territory during a Bullish Engulfing pattern, it supports a potential uptrend.
- Moving Averages: Patterns that align with the 50-day or 200-day moving average can signal higher probability setups.
- Manage Risk with Stop-Losses
Risk control is key. Use the pattern structure to define logical stop-loss points:- For Bullish Engulfing: Place the stop below the pattern’s lowFor Bearish Engulfing: Set the stop above the pattern’s high
How Are Double Candlestick Patterns Used in Trading?
Pattern Recognition with Precision
Traders at PlexyTrade begin by accurately spotting patterns like Bullish Engulfing or Evening Star on charts. These setups are best confirmed when seen near key technical levels and backed by momentum indicators.
Entry and Exit Strategy
For Morning Star patterns, enter after the third bullish candle closes. With Evening Star patterns, enter short positions after the third bearish candle. Define your take-profit and stop-loss levels based on nearby support and resistance zones.
Layered Confirmation
Double candlestick patterns are most powerful when supported by:
- High volume
- RSI divergence
- Moving Average crossovers
Stop-Loss Placement
To reduce downside risk, set your stop-loss slightly beyond the pattern’s extreme. This guards against false breakouts while allowing the trade room to move in your favour.
What Are the Different Types of Double Candlestick Patterns?
Double candlestick patterns offer traders a powerful tool for recognising market reversals and key trend shifts. At PlexyTrade, understanding these formations is part of a smarter, more strategic approach to technical analysis. Below are the most common double candlestick setups and how they can support your trading strategy.
1. Tweezer Tops
The Tweezer Tops pattern is a bearish reversal signal that appears after an uptrend. It consists of two candles with nearly equal highs. Typically, the first candle is a strong bullish (green) one, followed by a second candle — often a Doji or spinning top — that reflects hesitation among buyers.
This setup indicates that upward momentum is stalling. On day one, buyers dominate, but by the second session, the market is unable to break above the previous high, suggesting that sellers are stepping in. This shift can hint at an upcoming decline in price.
At PlexyTrade, we recommend watching for additional confirmation, such as a third bearish candle or increased volume, to validate the pattern before making a move.
2. Tweezer Bottoms
Tweezer Bottoms serve as a bullish reversal pattern, generally forming after a downtrend. It includes two candles with matching lows. The first is a strong bearish (red) candle, while the second shows bullish interest by opening near the same level and closing higher.
This pattern suggests a potential bottom has formed, with buying pressure emerging at a consistent support level. For example, if both candles find support around $50, it may indicate strong buyer interest at that level.
PlexyTrade encourages traders to pair this pattern with momentum indicators like the RSI for stronger confirmation before entering long positions.
3. Bearish Engulfing Pattern
The Bearish Engulfing pattern is a classic reversal signal that appears at the top of an uptrend. It features a small bullish (green) candle followed by a larger bearish (red) candle that completely engulfs the previous one.
This shift highlights a transition from buyer control to seller dominance. When spotted at a resistance level or after a rally, this pattern may suggest a significant downtrend is ahead.
Using PlexyTrade’s tools, traders can confirm this pattern with increased volume or MACD divergence and apply disciplined stop-losses above the engulfing candle to manage risk.
4. Bullish Engulfing Pattern
The Bullish Engulfing pattern indicates a potential reversal after a downtrend. It consists of a small bearish (red) candle followed by a larger bullish (green) candle that engulfs the first one.
This pattern reflects growing buying pressure and suggests the downtrend may be losing steam. If the green candle closes above a known resistance level, it strengthens the signal.
PlexyTrade traders often use this formation as a basis for entering long positions, especially when backed by other bullish indicators like an RSI bouncing from oversold levels.
5. Kicking Pattern
The Kicking Pattern is a bold and decisive reversal signal, made up of two candlesticks with opposite colours and a noticeable gap between them. There is no shadow overlap, which underscores the strength of the sentiment shift.
In the Bullish Kicking pattern, a red candle is followed by a green candle that opens above the previous session’s close, indicating strong buyer momentum. In a Bearish Kicking setup, a green candle is followed by a red one opening below the prior close, signalling potential selling dominance.
These patterns often precede sharp price moves. At PlexyTrade, we highlight them as high-alert signals, particularly when they form after periods of consolidation or major news events.
6. Bullish Harami Line
The Bullish Harami Line suggests a possible end to a downtrend. It starts with a long bearish candle, followed by a smaller bullish candle that remains entirely within the body of the first one.
This setup reflects market hesitation and may signal a shift in control from sellers to buyers. While not as aggressive as a bullish engulfing, this pattern shows declining bearish pressure and emerging bullish interest.
PlexyTrade advises pairing this setup with volume analysis or RSI confirmation to strengthen your confidence before committing to a trade.
7. Piercing Line Patterns
The Piercing Line is a key bullish reversal pattern that forms after a downtrend, offering early signals that sentiment may be shifting in favour of buyers. This two-candle formation consists of a long red candlestick, followed by a green candlestick that opens below the red candle’s close and then closes above its midpoint.
At PlexyTrade, we teach traders to look for this pattern as a sign of increasing buyer strength. The deeper the green candle closes into the red candle’s body—particularly past the 50% mark—the stronger the bullish signal.
To trade this setup, many traders enter long positions as the green candle closes above the midpoint of the red one. A prudent stop-loss is often placed just below the recent low. Combining the Piercing Line with support levels or technical tools like RSI and volume analysis helps confirm its reliability and improves trade timing.
8. Dark Cloud Cover
The Dark Cloud Cover pattern is a bearish reversal signal that typically appears at the end of an uptrend. It consists of two candles: a bullish green candle followed by a bearish red one that opens above the previous close but closes well into the body of the first candle.
This pattern suggests a sudden shift from buyer enthusiasm to selling pressure. At PlexyTrade, we highlight the importance of identifying whether the red candle closes below the midpoint of the green candle’s body. When it does, it reflects strong bearish intent.
To enhance pattern reliability, look for confirmation from declining volume or bearish divergence on momentum indicators. Traders may consider entering short positions when this pattern appears near key resistance levels, using stop-losses placed above the red candle’s high.
9. Bearish Harami Line
The Bearish Harami Line signals a potential trend reversal after an uptrend and is formed by two candles: a large bullish (green) candlestick followed by a small bearish (red) candlestick entirely contained within the body of the first.
This setup suggests hesitation in bullish momentum and the possibility of a market pullback. At PlexyTrade, we advise traders to observe this pattern closely at key resistance levels, where its effectiveness is amplified.
Volume analysis plays a vital role here—decreasing volume during the formation of the second candle supports the idea of fading buyer strength. For strategy execution, some traders may open short positions after confirmation from a third bearish candle or a technical indicator like a MACD crossover. Stop-loss levels are often set just above the recent highs to manage downside risk.
Conclusion
Double candlestick patterns serve as reliable indicators for spotting potential reversals and shifts in market sentiment. From well-known formations like the Bullish and Bearish Engulfing patterns to powerful setups like the Piercing Line and Kicking Pattern, these visual cues can provide early entry opportunities when interpreted correctly. At PlexyTrade, we believe that combining candlestick analysis with volume, support and resistance levels, and momentum indicators enhances accuracy and decision-making. Whether you’re a beginner or a seasoned trader, integrating these patterns into your strategy can offer a clearer perspective on market movements and help you stay one step ahead.
