Level 2 Patterns & indicators · Part 2/9

Continuation Patterns and the Doji Family

Not every candlestick pattern announces a turn. A large share of them describe either indecision or the continuation of what is already running.

The doji family

A doji has virtually no body — open and close coincide. The wicks separate the variants: (1) standard, (2) long-legged with wide range both ways, (3) dragonfly with a long lower wick, (4) gravestone with a long upper wick. All say the same basic thing: undecided. Only their position within a trend gives them meaning.

A doji has virtually no body: open and close coincide. The candle says exactly one thing – nothing was decided during the period. The variants differ only in their wicks:

Standard doji: wicks both ways, balanced.
Long-legged doji: very long wicks on both sides. Plenty of movement, no result – common at turning points and around news.
Dragonfly doji: long lower wick, no upper one. A relative of the hammer.
Gravestone doji: long upper wick, no lower one. A relative of the shooting star.

The doji is the best evidence that a candlestick pattern is empty without context. After a long rally it is a pause; in a sideways range it is the normal state. The candle is identical.

Marubozu and spinning top

(1) A marubozu is a candle with almost no wicks: price opens at one end of the range and closes at the other — one direction, all day. (2) The same downward. (3) A spinning top is the opposite: small body, wicks on both sides, plenty of movement with no result. Body length relative to total range is the real information in any candle.

The marubozu has no wicks or nearly none: open and close sit at the ends of the range. One direction, all period – the strongest form of agreement a single candle can express.

The spinning top is the opposite: small body, wicks on both sides. It says nothing about direction but something about participation – the market moves without deciding anything.

Sequences

(1), (2), (3): three strong green candles, each opening within the prior body and closing above its high. The pattern describes a stepwise, broadly carried recovery rather than a single jump. Its drawback is also its nature: by the time you can see it, the first part of the move is gone.

Three white soldiers: three strong up candles in a row, each opening inside the prior body and closing above its high. The pattern describes a stepwise, broadly carried move.

The mirror of the three soldiers: (1), (2), (3) — each candle opens inside the prior body and closes below its low. Such runs cluster in high-volatility regimes; judged without that context their significance is easily overrated.

Three black crows is the counterpart. Both sequences share a built-in drawback: by the time they are recognisable, a significant part of the move has already happened. They are descriptions, not entry signals.

Rising three methods

(1) A large green candle sets the range. (2) Three small red candles push back but stay inside that range — the pullback costs time, not ground. (3) The next large green candle closes above the first one's high. This is a continuation pattern, not a reversal.

A genuine continuation pattern: a large candle sets the range, several small counter-candles stay inside it, then another large candle in the original direction breaks beyond it.

The decisive condition is that the pullback does not leave the first candle’s range. It costs time but no ground – exactly what separates a breather from a reversal. The same principle on a larger scale is what charting calls a flag.

Perspective

Continuation patterns get described less often than reversals, even though they occur more frequently. The reason is psychological, not statistical: a turn is the better story. For a portfolio, the boring case is usually the more valuable one – it answers whether an existing position can be held.

From single candles to formations spanning weeks: reversal chart patterns.