Day Trading (Candlestick Pattern) Test #1 — Questions and Answers
Question 1: What does this candle pattern's name mean?
- Evening Star
- Shooting Star
- Morning Star (Correct answer)
- Bearish Engulfing
Correct answer: Morning Star
The candle pattern shown is a Morning Star, which is a bullish reversal pattern typically found at the bottom of a downtrend. It consists of three candles: a long bearish candle, followed by a small-bodied candle (often a doji or spinning top) that gaps down, and finally a long bullish candle that closes significantly into the body of the first bearish candle, signaling a potential shift from selling to buying pressure.
Question 2: The candle shown is known as a____________.
- Hammer Candle (Correct answer)
- Bullish Candle
- Doji Candle
- Bearish Engulfing
Correct answer: Hammer Candle
The candle displayed is known as a Hammer candle, which is a bullish reversal pattern. It is characterized by a small body located at the upper end of the trading range, a long lower wick that is typically at least twice the length of the body, and little to no upper wick. This pattern suggests that despite initial selling pressure, buyers stepped in strongly to push the price back up, indicating potential upward momentum.
Question 3: What does this candle pattern's name mean?
- Shooting Star (Correct answer)
- Afternoon Star
- Evening Star
- Morning Star
Correct answer: Shooting Star
The candle pattern depicted is a Shooting Star, which is a bearish reversal pattern that typically forms after an uptrend. It features a small body near the bottom of the candle's range, a long upper wick (at least twice the length of the body), and little to no lower wick. This pattern indicates that buyers initially pushed prices higher, but sellers then took control and drove the price back down, suggesting a potential reversal to a downtrend.
Question 4: What do these candle types stand for in the marketplace.
- Misprint on the chart
- Indecision (Correct answer)
- Bearish Bias
- Bullish Bias
Correct answer: Indecision
The candle types shown, known as Doji candles, signify indecision in the marketplace. A Doji forms when the opening and closing prices of an asset are virtually the same, resulting in a very small or non-existent body. This pattern suggests a balance between buying and selling pressures, indicating that neither bulls nor bears were able to gain control, often preceding a potential trend reversal or a period of consolidation.
Question 5: Give the right names for the A, B, C, and D points on this candle.
- A=HIGH B=OPEN C=CLOSE D=LOW
- A=HIGH B=CLOSE C=OPEN D=LOW (Correct answer)
Correct answer: A=HIGH B=CLOSE C=OPEN D=LOW
A candlestick visually represents price action over a specific period. Point A indicates the highest price reached during that period (HIGH), and point D represents the lowest price (LOW). For a bullish candle (typically green, meaning the closing price was higher than the opening price), point B is the closing price (CLOSE), and point C is the opening price (OPEN), as the price moved upwards from open to close.
Question 6: Pick the right candle's A, B, C, and D points.
- A=HIGH B=OPEN C=CLOSE D=LOW (Correct answer)
- A=HIGH B=CLOSE C=OPEN D=LOW
Correct answer: A=HIGH B=OPEN C=CLOSE D=LOW
This question refers to the standard anatomy of a candlestick, which visually represents price movements over a period. For any candlestick, the 'HIGH' point (A) is the highest price reached, and the 'LOW' point (D) is the lowest price reached, both indicated by the wicks. The 'OPEN' (B) is the price at which trading began, and the 'CLOSE' (C) is the price at which trading ended for that period, forming the body of the candle. The correct answer accurately assigns these points based on standard charting conventions.
Question 7: A ______________ candle pattern is the one seen below.
- Shooting Star
- Evening Star
- Inside Candle
- Bearish Engulfing (Correct answer)
Correct answer: Bearish Engulfing
A Bearish Engulfing pattern is a two-candle reversal pattern that typically appears at the end of an uptrend. It consists of a small bullish (green) candle, immediately followed by a larger bearish (red) candle whose body completely 'engulfs' the body of the preceding bullish candle. This pattern indicates a strong shift in momentum from buying to selling pressure, signaling a potential reversal into a downtrend.
Question 8: A ______________ is the name of the following candle design.
- Morning Star
- Evening Star (Correct answer)
- Hammer Star
- Shooting Star
Correct answer: Evening Star
The Evening Star is a three-candle bearish reversal pattern, often found at the top of an uptrend. It begins with a large bullish candle, followed by a small-bodied candle (which can be bullish or bearish, often a doji or spinning top) that gaps up, and concludes with a large bearish candle that closes well into the body of the first bullish candle. This sequence demonstrates a loss of bullish momentum and a strong shift to bearish control, indicating a potential trend reversal downwards.
Question 9: When they occur at ________________, bearish reversal patterns are most likely to occur.
- Any Level
- Resistance Levels (Correct answer)
- Support Levels
Correct answer: Resistance Levels
Bearish reversal patterns indicate a potential shift from an uptrend to a downtrend. Resistance levels are price points where selling interest is expected to be strong enough to halt or reverse an upward price movement. Therefore, when bearish reversal patterns form at these key resistance levels, their reliability and significance as signals for a market downturn are significantly increased.
Question 10: Please choose two bearish candle patterns.
- Shooting Star (Correct answer)
- Morning Star
- Hammer Candle
- Evening Star (Correct answer)
Correct answer: Shooting Star
A Shooting Star is a single-candle bearish reversal pattern characterized by a small body, a long upper wick, and little to no lower wick, appearing after an uptrend. The Evening Star is a three-candle bearish reversal pattern, as described previously, signaling a shift from bullish to bearish momentum. Both patterns indicate that buyers attempted to push prices higher but were ultimately overcome by sellers, suggesting a potential downtrend.
Question 11: Mark each box that applies. Describe four different bullish candlestick patterns.
- Evening Star Reversal
- Morning Star Reversal (Correct answer)
- Graves Stone Doji (Correct answer)
- Hammer Candle (Correct answer)
- Bullish Engulfing (Correct answer)
- Shooting Star
- Horse Shoe Reversal
Correct answer: Morning Star Reversal
The Morning Star Reversal is a three-candle bullish reversal pattern that typically forms at the bottom of a downtrend. It begins with a large bearish candle, followed by a small-bodied candle (often a doji or spinning top) that gaps down, and concludes with a large bullish candle that closes well into the body of the first bearish candle. This pattern signals a shift from selling pressure to buying pressure, indicating a potential upward trend reversal.
Day Trading (Candlestick Pattern) Test #1
What does this candle pattern's name mean?