Reading a stock chart, simplified

What is the Relative Strength Index?

The Relative Strength Index is a momentum oscillator that measures the speed and change of price movements. Its movement oscillates between 0 and 100 and indicates whether a stock is ‘Overbought’ or ‘Oversold’.

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What is a Doji candlestick?

A Doji is formed when the open and close of a security are nearly equal. The length of the upper and lower shadows – the high and low of the day, respectively – can vary, and the resulting candlestick looks like a cross.

Morning Star Doji: A Morning Star Doji is used by stock analysts to predict the price movements of a security, derivative, or currency over time. It includes three candles: a large red candlestick, a small-bodied candlestick and a green candlestick.

Hammer: A hammer is a price setup that occurs when a stock trades significantly lower than its open price, but rallies to close near its open.

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Meaning of a Shooting Star Candle and Engulfing Patterns

Shooting star candle: A shooting star is a bearish candlestick that is the opposite of the hammer candlestick. The price pattern is accompanied by a long upper shadow and a small real body near the day’s low.

Bullish Engulfment: A bullish engulfing pattern is formed when a small red candlestick is followed the next day by a large green candlestick. The body of the next candlestick completely engulfs the body of the previous candlestick.

Bearish Engulfment: A bearish engulfing pattern is formed when a small green candlestick is followed the next day by a large red candlestick.

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