Candlestick Stock Screener

Traders looking to generate returns from short-term price movements in assets usually prefer analysing and examining candlestick patterns to predict future trends and momentum. However, going through candlestick charts manually can take up a lot of time, which may lead to missed trading opportunities. Also, there’s a chance of misinterpreting candlestick patterns as well. Here’s where a candlestick pattern screener can help.

A candlestick screener is a tool that’s used to identify potential trading opportunities by analysing candlestick patterns. The screener can scan vast amounts of historical and real-time market data to identify specific candlestick formations, such as doji, bullish and bearish engulfing or hammer patterns.

With the help of this stock screener, you can shortlist stocks depending on the candlestick criteria you choose, allowing you to make informed decisions like when to buy or sell a stock.

A candlestick is essentially a visual representation of the price movement of an asset. It resembles a candle and has three distinct parts - a coloured rectangular body (candle), a thin upper line (upper shadow or upper wick) and a thin lower line (lower shadow or lower wick).

The candle represents the opening and closing prices of the asset, whereas the upper and lower wicks represent the highs and lows that the asset reached during the specified time frame. The colour of the candle can either be green or red depending on how the asset moved during the time frame. For instance, if the asset’s price at the end of the time frame is higher than what it was at the start, the candle will be green. On the other hand, if the asset’s price at the end of the time frame is lower than what it was at the start, the candle will be red.

Research 360 by Motilal Oswal offers a comprehensive candlestick stock screener in India. You can quickly identify stocks that have exhibited bullish or bearish candlestick patterns. To use the screener, all you need to do is select ‘CandleStick’ on the ‘Screeners’ section of the platform.

The candlestick patterns are categorised into two types - ‘Bullish’ and ‘Bearish’. Select the candlestick pattern from either of the two drop-down lists. The stock screener will instantly filter and display the list of stocks that have recently exhibited the chosen candlestick pattern.

There are more than 80 formally recognised candlestick patterns that traders around the world use. As a trader, you need to be able to identify the various patterns to accurately predict how the asset is likely to move. Here are some of the most popular and widely occurring patterns that you will often find.

Doji

The doji is one of the most important candlestick patterns. It is characterised by long upper and lower wicks and a very short body. In fact, many dojis resemble a cross due to their short bodies. A doji represents indecision or a pause in the trend. If the pattern appears during a bearish or bullish trend, it may signal a potential reversal.

Dragonfly Doji

A dragonfly doji is a variation of the standard doji. It is characterised by a long lower shadow and a short or non-existent upper shadow. The body of the candle is situated right at the top, making the pattern look like a ‘T’. The dragonfly doji usually appears during a bearish trend and may signal a potential trend reversal.

Gravestone Doji

The gravestone doji is the converse of a dragonfly doji and is characterised by a long upper shadow and a short or non-existent lower shadow. The body of the candle is situated right at the bottom, making the pattern resemble an inverted ‘T’. The gravestone doji generally appears during a bullish trend and may signal a potential trend reversal.

Hammer and Inverted Hammer

Another set of very popular patterns that you can find in a candlestick stock screener in India is the hammer and inverted hammer. The hammer looks very similar to a gravestone doji but with a thicker green body at the top of the candle. The pattern derives its name from its close resemblance to a hammer.

The inverted hammer, meanwhile, is essentially an inverted hammer pattern. Both the hammer and inverted hammer are bullish candlestick patterns that generally appear during a bearish trend, signalling a potential reversal.

Hanging Man and Shooting Star

The hanging man and shooting star are both very similar to the hammer and inverted hammer respectively. The hanging man has a red body at the top with a long lower wick, whereas the inverted hammer has a long upper wick and a red body at the bottom. Both of these patterns appear during a bullish trend and may indicate a future reversal.

White and Black Marubozu

The Marubozu is another very important pattern that most candlestick screeners have. It is characterised by a long body and non-existent upper or lower wicks. There are two variants of the pattern - white Marubozu or black Marubozu.

A white Marubozu is created when the price opens at the day’s low and increases throughout the session, ending at the day’s high. If a white Marubozu appears at the end of a bearish trend, there’s a high chance of the trend reversing.

A black Marubozu, meanwhile, is created when the price opens at the day’s high and decreases throughout the session, ending at the day’s low. If a black Marubozu appears at the end of a bullish trend, there’s a high chance of the trend reversing.

Bullish and Bearish Harami

The bullish Harami is a two-part candlestick pattern that’s characterised by a red candle with a long body followed by a green candle with a short body. The short green candle must be fully contained within the long red candle. If the bullish Harami appears during a bearish trend, the price movement may likely reverse.

The bearish Harami, meanwhile, is characterised by a green candle with a long body followed by a red candle with a short body. The short red candle must be fully contained within the long green candle. If the bearish Harami appears during a bullish trend, the price movement may likely reverse.

Bullish and Bearish Harami Cross

The Harami Cross is another two-part candlestick pattern and is very similar to the Harami. However, there’s a doji after the long candle instead of a short candle. The bullish Harami Cross is characterised by a long red candle followed by a doji. If the pattern appears during a bearish trend, it may signal a shift in the trend. The bearish Harami Cross is characterised by a long green candle followed by a doji. If the pattern appears during a bullish trend, it may signal a potential reversal.

Bullish and Bearish Engulfing Pattern

The engulfing pattern is a very important pattern you can find in a candlestick chart screener. The bullish engulfing pattern is characterised by a short red candle followed by a long green candle. The long green candle must completely cover or engulf the short red candle. If the pattern appears during a bearish trend, it may indicate a potential trend reversal.

The bearish engulfing pattern, on the other hand, is characterised by a short green candle followed by a long red candle. The long red candle must completely cover or engulf the short green candle. If the pattern appears during a bullish trend, it may indicate a potential trend reversal.

Piercing Line

The piercing line is a two-part candlestick pattern characterised by a long red candle followed by an equally long green candle. However, the closing price of the green candle must be 50% or above the red candle’s body. Furthermore, the opening price of the green candle must be below the closing price of the red candle. The piercing line pattern generally appears at the end of a bearish trend and may potentially signal a trend reversal.

Dark Cloud Cover

The dark cloud cover is an inverse of the piercing line. It consists of a long green candle followed by an equally long red candle. The closing price of the red candle must be near 50% of the green candle’s body. The pattern appears at the end of a bullish trend and signals a reversal.

Upside Tasuki Gap

The upside Tasuki Gap is a three-candlestick pattern you can find in a stock screener. It consists of a green candle, followed by another green candle and then by a red candle. Here, the second green candle has a gap-up opening compared to the first green candle. The red candle, meanwhile, must close below the opening of the second green candle. If the pattern appears during a bullish trend, it may signal a continuation of the momentum.

Morning Star

A sign of trend reversal, the morning star candlestick pattern usually appears at the end of a bearish trend. It consists of three candlesticks - a long red candle, a short red candle and a long green candle. The short red candle must have a gap-down opening and the long green candle must open near the close of the short red candle.

Three White Soldiers

Another very popular three-candlestick pattern, the three white soldiers consist of three green candles in a staggered upward formation. The close of each candle must be near or below 50% of the succeeding candle’s body. The appearance of the pattern during a bearish trend may indicate a potential reversal.

Identical Three Crows

The converse of the three white soldiers, the identical three crows consist of three red candles in a staggered downward formation. The close of each candle must be near or below 50% of the succeeding candle’s body. The appearance of the pattern during a bullish trend may indicate a reversal.

Bullish Kicking

The bullish kicking is a two-part candlestick pattern consisting of a red candle followed by a green candle. The green candle must open near or above the red candle’s opening price. The pattern represents reversals and usually appears during a bearish trend.

Abandoned Baby Bottom

The abandoned baby bottom is a three-part pattern consisting of a long red candle, a short red candle and a long green candle. The second short red candle must have a gap-down opening, whereas the long green candle must open above the closing price of the short red candle. If the pattern appears during a bearish downtrend, it may indicate a reversal.

Abandoned Baby Top

The abandoned baby top is a three-part pattern available in a few candlestick screeners. It consists of a long green candle, a short green candle and a long red candle. The second short green candle must have a gap-up opening, whereas the long red candle must open below the opening price of the short green candle. The pattern signifies trend reversal and appears during a bullish uptrend.

There isn't a single "most reliable" candlestick pattern, per se. The effectiveness and reliability of candlestick patterns depend on various factors like market conditions, volatility and time frame, among others.

That said, some candlestick patterns typically generate stronger signals than others, these include engulfing patterns, dojis, hammers and shooting stars. It is advisable to combine multiple candlestick patterns and technical analysis tools to get accurate predictions. Also, no candlestick pattern can guarantee success. Therefore, it is ideal to ensure proper risk management practices.

Although using candlestick stock screeners is a much faster and more efficient way to identify potential trading opportunities, as a trader, you need to know how to analyse candlestick patterns. Here’s a quick overview of the step-by-step process you need to follow.

Step 1: Set a Time Frame

The first step in candlestick pattern analysis is determining the time frame you wish to use. The time frame can be as short as a minute to as long as weeks and months. The patterns have different implications depending on the chosen time frame.

Step 2: Finalise Your Trading Strategy

Once you’ve decided on the time frame, the next step is to determine the trading strategy you’re going to use. Your strategy can either be scalping, which requires quick trade executions, or momentum trading, which is not as fast-paced.

Step 3: Identify Ongoing Trends

Once you’ve finalised the strategy, determine the current trend of the asset. The ongoing trend can influence the type of patterns that may appear.

Step 4: Look Out for Patterns

Keep a keen eye out for the various candlestick patterns. If the ongoing trend is bullish, look out for trend continuation and reversal patterns.

Step 5: Look for Confirmation

If you’ve spotted a pattern, try to confirm the trend reversal or continuation with other technical indicators. This will reduce the chances of the market moving against your position.

Step 6: Place Trades

Once you’ve gotten the confirmation, you can proceed to enter into your preferred position.