CMT CMT Candlestick Analysis 2 — Questions and Answers
Question 1: A 'Harami' candlestick pattern occurs when:
- The second candle's body is contained within the first candle's body (Correct answer)
- The second candle closes above the first candle's high
- Both candles are doji patterns
- The second candle gaps above the first candle
Correct answer: The second candle's body is contained within the first candle's body
A Harami consists of a large candle followed by a smaller candle whose body fits entirely within the larger candle's body, suggesting a potential trend slowdown.
Question 2: Which candlestick pattern is identified by a long lower shadow at least twice the length of the real body, appearing in a downtrend and signaling a potential reversal?
- Inverted Hammer
- Hanging Man
- Hammer (Correct answer)
- Doji
Correct answer: Hammer
The Hammer forms in a downtrend with a small real body and a long lower shadow, showing that buyers overcame selling pressure during the session.
Question 3: A 'Dark Cloud Cover' pattern is most reliably used as:
- A bullish continuation signal
- A bearish reversal signal in an uptrend (Correct answer)
- A neutral consolidation pattern
- A volume-based divergence indicator
Correct answer: A bearish reversal signal in an uptrend
Dark Cloud Cover forms when a bearish candle opens above the prior bullish candle's close and closes below its midpoint, suggesting a bearish reversal.
Question 4: A 'Piercing Line' pattern in candlestick analysis signals:
- Bearish reversal at resistance
- Bullish reversal in a downtrend (Correct answer)
- Continuation of the existing trend
- Indecision between buyers and sellers
Correct answer: Bullish reversal in a downtrend
The Piercing Line forms in a downtrend when a bullish candle opens below the prior bearish candle's low and closes above its midpoint, indicating buying pressure.
Question 5: A 'Spinning Top' candlestick is characterized by:
- A long body with no shadows
- A small body with upper and lower shadows of similar length (Correct answer)
- A body that gaps away from the prior candle
- An open equal to the prior session's close
Correct answer: A small body with upper and lower shadows of similar length
A Spinning Top has a small real body with roughly equal upper and lower shadows, reflecting market indecision as neither bulls nor bears dominated.
Question 6: Which of the following best describes a 'Morning Star' candlestick pattern?
- A single large bullish candle after a gap down
- A three-candle bullish reversal with a small middle candle (Correct answer)
- Two consecutive bullish engulfing candles
- A long lower shadow followed by a gap up
Correct answer: A three-candle bullish reversal with a small middle candle
The Morning Star is a three-candle bullish reversal pattern with a bearish candle, a small-bodied star candle (possibly with a gap), and a large bullish candle.
CMT CMT Candlestick Analysis 2
A 'Harami' candlestick pattern occurs when: