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What are Bullish Reversal Patterns & How Do You Read Them?

Bullish Reversal Patterns are universal patterns that candlesticks can follow that signify a change from a downwards movement to an upwards movement of share price. Identifying these patterns may help when trying to predict if the stock is a good buy. However, it is important to remember that even though a pattern begins to form, it does not always need to finish. There is no guarantee that a pattern will follow through to the end.

With that being said, here are some of the most popular Bullish Reversal Patterns:

Double Bottom

    
Above is an example of the Double Bottom pattern. This can be identified by the two identical bottom points the share price reaches. Some investors like this pattern for its relative price, short-term trading, and long-term trading opportunities. Since the share price hits a bottom, it is most likely relatively cheap and likely has a low RSI. This allows for lots of upwards potential and profit in the long run. On the other hand, the Double Bottom pattern also allows for a short-term trading opportunity after the initial dip. Some investors like to buy after the first bottom and then sell at the top of the smaller recovery, and then buy again at the second bottom and ride the whole recovery back up. All in all, the Double Bottom pattern allows for a cheap buy with multiple trading opportunities of long and short-term goals.

Inverted Head and Shoulders


    Above is an example of the Inverted Head and Shoulders pattern. This can be identified simply by the name. As you can see, it looks like an upside-down person's head and shoulders. Some investors like this pattern because it has one of the most trading opportunities of any pattern. It has three separate dips and recoveries that can be trades effectively. However, some investors do not buy the third dip and just hold their investment from the second dip. This is a longer-term trade but can allow for a larger profit.

Three White Soldiers

    Above is an example of the Three White Soldiers pattern. This can be identified by a steady decline of share price followed by three green candlesticks in a row that close higher than the candlestick before. In simple terms, this means that the buyers of this stock are outperforming the sellers. Even though this pattern does not have as many trading opportunities as some others mentioned, it is a very simple pattern for beginners to start with. Depending on how fast the share price moves, this can be both a long-term and short-term trade. Either way, the Three White Soldiers pattern is a great pattern that traders of every experience use at some point.


    Now, you hopefully understand how to recognize and read some of the most popular Bullish Reversal Patterns. There are many other Bullish Reversal Patterns you can capitalize on so if you want to look more into this, feel free to research more. Just as another quick reminder, there is no guarantee that a pattern has to finish once it has begun forming. Trading patterns is risky and not always successful for some traders. It is important to understand this risk and do more research into a stock before just buying it for its pattern.












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