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Most Lucrative Candlestick Patterns - How to Read Stock Charts - YouTube
Channel: Riley Coleman
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So what are some candlestick patterns
you can use to make money in this video
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I'm gonna go into some kind of sick
continuation patterns that will give you
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strong signals so you know you're not
just being greedy and chasing and move
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but actually training like a pro
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hey how's it going on this channel I
teach you the steps I took to go from
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trading with a full-time job to trading
as a full-time job so if you're new here
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consider subscribing and today we're
going into candlestick continuation
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patterns so the saying goes buy low sell
high and that generally works
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theoretically with most markets and
stocks because they do go through a
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cycle of up and down but some stock
trends are so strong that they will be
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what seems like only one directional and
this makes it hard to buy into without
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feeling like you're chasing or getting
greedy that's idea of these continuation
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patterns is that even though a stock
could be at all-time highs or all-time
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lows the pattern tells you that it's
highly likely that the trend is going to
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continue some key points to make about
these continuation patterns is you
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always want to trade with the trend if
you have a bullish continuation pattern
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in a bullish trend that's a strong
signal but if you have a bullish
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continuation pattern in a bearish trend
that can be a mixed signal the idea is
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you want the signal and the trend to
line up because that'll give you the
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highest probability of it going in the
right direction also with any pattern
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it's never an exact science if you draw
some kind of trendline for a pattern and
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the stock breaks through that trendline
by just a little bit or even a decent
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amount but it recovers the pattern the
pattern is still in place it's more
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about the overall pattern and what that
shows you not drawing the lines and
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having it perfectly follow those lines
that you drew for our first pattern we
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have a bullish flag or flag out and like
all of these patterns we need a trend in
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place and for this one we have a uptrend
in place already
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the idea of this pattern is that it
makes a what looks like a flag with the
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stock chart and as you can see we have
that here created
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by these candles that make this strong
vertical up move and then the chart goes
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into a more choppy section making that
flag the whole idea with this pattern is
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that even in the strongest of trends
there might not be pull backs but there
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are moments of pause and that's what
this shows us that this stock is taking
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a pause or a breather before its next
leg higher even though in this chart the
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stock actually broke below our flag and
potentially broke our pattern but the
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idea is that it did end up recovering
the pattern and coming back into that
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channel that we drew how you can play
these and buy into these is you can
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either buy them try and buy them at the
bottom of the channel or anywhere in the
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flag or you can wait for it to break out
of the flag with a really strong
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confirmation of either volume or it just
spends a few days above the flag so as
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you can see here it's spent about nine
to ten candles above that flag which
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would really give you a confirmation
that it is breaking out of this flag and
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it's gonna continue higher and continue
with that huge trend that it had in
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place beforehand
here's another bull flag example and
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again initially we have that trend in
our favor and the direction of the flag
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pattern that we're looking at and we
have this initial solid up move creating
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the pull of that flag these never are
really vertical exactly like a vertical
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pole for a flag but the idea is that the
stock has moved up rapidly towards the
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place where we draw the flag and so here
we can draw this flag and creating that
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pattern with this flag it's somewhat
down sloped and not like
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flat channel like before but the pattern
remains in place as a still a strong
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continuation pattern that will show that
the trend is going to keep going higher
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and as you can see as it broke out of
this channel and gapped up here the
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trend continued in a strong upwards
trend
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so our next pattern is a wedge pattern
the whole idea behind this pattern is
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that again you always have that trend in
place but the stock was volatile and
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then it turns into being really
unvoluntary
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that wedge somehow and that'll usually
be in the direction of the trend that
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was previously made wedges don't always
look just like this one they can be in
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different orientations of that triangle
but the main idea is that the stock came
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up in and created that wedge with idea
that this is a continuation pattern and
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then the stock is now going to continue
that trend that had already had once it
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breaks that wedge there you go about
drawing the trend lines for these wedges
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is where you got a spot the wedge and
once you do that you draw the lines
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along either the top trend line that you
see or the bottom trend line or support
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line that you see so for here we would
want to draw a line along the tops of
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these candles that are forming this
downtrend and then at the bottom we
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would see this support line get created
by these candles that are roughly
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bottoming out in the same spot again it
doesn't have to be an exact science you
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can move these lines around pretty
loosely and it will still create this
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wedge for you the main idea again is to
look at the whole of the pattern and see
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that it's making a wedge in an already
established uptrend
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and that once it breaks out of this
wedge to the upward side it'll continue
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that upward trend here's an example of
that same wedge but in a downward trend
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market the bottom of the wedge is
created by this support level that the
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stock holds for quite a while but then
even after a bounce the stock makes this
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downward trend creating that wedge for
us using that wedge and the idea that
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the stock was in a previous downtrend we
could have looked to short the stock or
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bet that the stock was gonna go down
once the stock broke out of this wedge
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for this stock we can see that both
sides of the wedge are actually more in
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a trend the bottom is in an upward trend
and the top is in a downward trend the
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only way to really know where these are
gonna go is using the direction of the
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trend and as well as seeing that it
breaks out in the direction that you
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want it to with idea that this was in an
uptrend already you would hope and guess
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that it's gonna break to the upside you
always want to wait for that
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confirmation of the stock breaking to
the upside but when it does you know
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that it will be a strong pattern to buy
into as this wedge developed you could
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have seen that the stock started
breaking out of the initial trend line
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that you drew and you could have redrawn
the trendline to being a little bit of a
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better trendline which would have given
you a better signal you can always try
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and redraw these and reevaluate them as
they develop so you can get the best
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signal possible so the next continuation
pattern is a channel now unlike the
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wedge and the flag out this one is more
showing you that the trend is still in
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place and that there are buying
opportunities in that trend to draw
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these channels it just takes two trend
lines of either resistance or support to
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make that channel the idea is once you
draw these two lines you know where to
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buy and sell throughout the market
so once this channel is drawn you could
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buy it at the bottom of the channel and
then with idea of selling it somewhere
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near the top and then as the stock
fluctuates throughout the channel you
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can know really where you are in the
market and if the market is overbought
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and oversold really giving you a strong
trigger to buy or sell or know when you
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should get in or get out what happened
for this channel is once the stock broke
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out of the channel it actually started
an even stronger uptrend and the crazy
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part about looking at this channel is
you can see that the stock bounced in
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the channel and then once it broke out
of the channel it actually came and
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bounced off the top of the channel
resistance line essentially turning it
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from resistance into support it used
that line as support and then started
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this huge trend upwards that you would
be able to buy into either on the break
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of that channel or when it came down and
hit the top of that channel as support
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as this market broke to the upside
through creating that new trend as it
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broke out of that channel it actually
eventually crashed and this is the stock
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market in the beginning of the 2018 year
and you can see that it came down to our
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support line drawn from this channel
previously you can see that here it
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bottomed at that support level and
tapped it almost three times these trend
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lines that you draw on these large time
frame graphs this chart being a daily
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chart can be really powerful this would
have been a great buying opportunity to
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essentially buy the bottom of the market
and if you miss it the first time it
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gave you two more opportunities to buy
in at that support level channels don't
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have to necessarily be in just uptrend
channels they can be any direction they
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can be sideways or downwards channels
the idea is that this is a strong way to
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just spot the trend of the market and
keep you focused on where the market is
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going to go and what is a
crazy out of the blue move or what is a
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normal move in the current market
conditions our last pattern is the cup
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and handle pattern now this pattern
actually has some of the pullback but
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the idea is that even with a pullback it
allows you to identify that there is
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still going to be a continuation in the
trend just like all the patterns you
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always want to trade with the trend and
here we have an uptrend with idea of
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that this is just going to signal a
pause in the upward trend and give us an
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entry point to buy into that next upward
move that it's gonna make how this
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pattern works is the stock comes up to a
high that it makes and that becomes a
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resistance level and the stock then
begins to sell off but as it bottoms out
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and starts trending back higher it kind
of makes a u-shaped bottom that creates
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that cup pattern usually you want it to
be somewhat gradual in both directions
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it's not perfect every time just like
all these patterns in this pattern we
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can see that there is a huge down day as
one of the days and then there was also
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a huge up day but the pattern still is
there and pretty strong as this pattern
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continues to form the price comes back
up to that resistance line that we
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previously saw and begins to actually
sell off out of our cup pattern raiding
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the handle pattern and the idea is that
there is this initial sell-off from that
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and then the stock breaks out of this
downward channel that creates the handle
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of the cup and handle pattern and then
once it breaks out of that it begins the
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continuation of that upward trend that
we previously saw if you amiss the
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initial break out from that handle part
of the pattern there was still a buying
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opportunity when the stock came back
down and touched that old resistance
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level and turned it into a sub
port level right frequently when stocks
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break through a level that is your
resistance or support it'll flip it to
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the other side so here we have this
previously resistance level and once the
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stock broke through that with this
pattern it came back down and touched it
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and use it as a support level hey thanks
for training on this video if you want
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to learn more about candlestick patterns
here's a video on candlestick reversal
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patterns and I have a playlist here of
just candlestick patterns and how to
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read candlestick charts in general make
sure to subscribe to the channel if you
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want to learn more how to trade in the
stock market and leave a like and ask
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any comments or questions down below
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