CMT CMT Candlestick Analysis 1 — Questions and Answers
Question 1: A 'Doji' candlestick is characterized by which of the following?
- Open and close prices are nearly equal (Correct answer)
- A very long upper shadow with no lower shadow
- A large bullish body with no wicks
- Open price is far above the close price
Correct answer: Open and close prices are nearly equal
A Doji forms when the open and close prices are virtually the same, signaling indecision in the market.
Question 2: Which candlestick pattern is formed by a small body at the top of the candle with a long lower shadow, indicating a potential bullish reversal?
- Shooting Star
- Hammer (Correct answer)
- Engulfing
- Spinning Top
Correct answer: Hammer
A Hammer has a small real body near the top and a long lower shadow, suggesting that sellers drove prices down but buyers pushed them back up.
Question 3: A 'Shooting Star' candlestick pattern most commonly signals:
- Bullish continuation
- Bearish reversal (Correct answer)
- Market consolidation
- Volume spike confirmation
Correct answer: Bearish reversal
A Shooting Star appears at the top of an uptrend with a long upper shadow and small body, signaling a potential bearish reversal.
Question 4: In Japanese candlestick analysis, a 'Marubozu' candle indicates:
- Equal open and close prices
- A candle with no shadows, showing strong momentum (Correct answer)
- A reversal at a key support level
- High volume with a neutral close
Correct answer: A candle with no shadows, showing strong momentum
A Marubozu has no upper or lower shadows, meaning the open equals the high (or low) and the close equals the opposite extreme, reflecting strong directional conviction.
Question 5: Which two-candle pattern forms when a small bearish candle is followed by a large bullish candle that completely engulfs the first, signaling a potential reversal?
- Bearish Harami
- Bullish Engulfing (Correct answer)
- Dark Cloud Cover
- Piercing Line
Correct answer: Bullish Engulfing
A Bullish Engulfing pattern occurs when a large bullish candle's body completely covers the prior small bearish candle, indicating buyers have taken control.
Question 6: The 'Evening Star' candlestick pattern is a:
- Single-candle bullish reversal signal
- Three-candle bearish reversal pattern (Correct answer)
- Two-candle continuation signal
- Single-candle bearish continuation pattern
Correct answer: Three-candle bearish reversal pattern
The Evening Star is a three-candle bearish reversal pattern consisting of a large bullish candle, a small-bodied candle (the star), and a large bearish candle.
CMT CMT Candlestick Analysis 1
A 'Doji' candlestick is characterized by which of the following?