CTA Candlestick Analysis & Japanese Techniques 1

Question 1

A 'Doji' candlestick is significant because it indicates:

Accepted Answer

A period where opening and closing prices are nearly equal, reflecting market indecision

Answer

A Doji forms when open and close are virtually the same, signaling a battle between buyers and sellers with no decisive winner, often appearing at potential turning points.

Question 2

What is a 'Hammer' candlestick pattern and what does it signal?

Accepted Answer

A candle with a long lower shadow and small body near the top of its range, appearing at a low and signaling bullish reversal

Answer

A Hammer has a long lower shadow (at least twice the body) with little to no upper shadow and appears after a downtrend, signaling that buyers pushed price significantly off the lows.

Question 3

The 'Engulfing' candlestick pattern requires that:

Accepted Answer

The second candle's body completely engulfs the first candle's body in the opposite direction

Answer

A bullish engulfing pattern has a large white/green candle that completely engulfs the prior red/black candle's body, signaling a shift in momentum from sellers to buyers.

Question 4

What does the 'Morning Star' three-candle pattern signal?

Accepted Answer

A potential bullish reversal, consisting of a long down candle, a small-body candle, then a strong up candle

Answer

The Morning Star signals a bullish reversal: a long bearish candle shows selling dominance, the middle star shows indecision, and the final bullish candle confirms the shift to buying.

Question 5

A 'Shooting Star' candlestick is characterized by:

Accepted Answer

A long upper shadow and small body at the lower end of the range, appearing after an uptrend

Answer

The Shooting Star has a long upper shadow (at least twice the body) at the top of an uptrend, indicating that buyers initially drove price higher but sellers regained control by the close.

CTA - Certified Technical Analyst Practice Test

CTA - Certified Technical Analyst Practice Test

CTA Candlestick Analysis & Japanese Techniques 1