Are there specific candlestick patterns for stocks? Well, there are certain candles that work less well for stocks, especially for those stocks that gap a lot. The reliability of a chart pattern depends a lot on how big the volume is. In case there is not a lot of volume – and many shares are like this – the candles won’t work very well.
So if you want to trade candles with stocks, pick those stocks that produce significant volume.
Also pay attention to the timeframe, daily level is works pretty well for most stocks, especially those in the S&P 500. In case you wish to do intraday trading, you would have to narrow your list of stocks to the higher traffic ones.
Using bullish candlestick patterns to buy stocks can be a good idea. When looking for an entry signal to invest in a stock for the long term bullish reversal candles near a support level could work well. This means that the buyers take over the control over the price. In this case there is a good chance that the stock price will continue climbing if the fundamentals are strong. It’s important not to make investment decisions based on a single candle. Do your homework and research the stock to make sure there is a fundamental reason to buy into it.
In similar fashion, another good entry sign can be a continuation pattern. It should appear near a breakout or at the end of a consolidation period.
In summmary, you can use candlesticks to enter and exit stock trades. Make sure there is enough volme and as always it is crucial to look for other signs that reinforce the candle. Also research the background of the stock before putting your money into it. Especially for long term investing, a candle is simply one of the signals for a good entry or exit point. The way you select the stock is that you believe in the fundamentals. Then you time the entry when you see a candle and some other signal e.g. a breakout or a reversal.
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