CTA Candlestick Analysis & Japanese Techniques 2 — Questions and Answers
Question 1: What distinguishes a 'Spinning Top' from a 'Doji' candlestick?
- A Spinning Top has a larger body relative to its shadows compared to a Doji (Correct answer)
- A Doji has equal upper and lower shadows while a Spinning Top does not
- Spinning Tops only appear in uptrends
- A Doji always signals a reversal while a Spinning Top does not
Correct answer: A Spinning Top has a larger body relative to its shadows compared to a Doji
A Spinning Top has a small but visible real body with upper and lower shadows, while a Doji has virtually no body because open and close prices are essentially equal.
Question 2: The 'Three White Soldiers' pattern is a bullish continuation signal when:
- Three consecutive long white candles appear after a downtrend reversal or during a consolidation, each closing near the high (Correct answer)
- Three candles appear above the 200-day moving average
- Three gap-up candles occur in a single week
- Three candles have equal-length bodies and shadows
Correct answer: Three consecutive long white candles appear after a downtrend reversal or during a consolidation, each closing near the high
Three White Soldiers consists of three consecutive long bullish candles, each opening within the prior body and closing near its high, signaling strong and sustained buying momentum.
Question 3: A 'Dark Cloud Cover' pattern signals bearish reversal when:
- A long red candle forms below a moving average
- The second candle opens above the prior candle's high and closes below the midpoint of the first bullish candle (Correct answer)
- Volume declines on two consecutive down candles
- A candle's close is equal to its open
Correct answer: The second candle opens above the prior candle's high and closes below the midpoint of the first bullish candle
Dark Cloud Cover occurs when a bearish candle opens above the prior bullish candle's high but closes below its midpoint, indicating that sellers have seized control from buyers.
Question 4: Which candlestick pattern is the inverse of the Hammer and appears at the top of an uptrend?
- Evening Star
- Shooting Star
- Inverted Hammer
- Hanging Man (Correct answer)
Correct answer: Hanging Man
The Hanging Man looks identical to a Hammer (small body, long lower shadow) but appears after an uptrend, signaling that selling pressure is beginning to emerge at the highs.
Question 5: What is a 'Harami' candlestick pattern?
- A single candle with no shadows
- A two-candle pattern where a small candle's body is contained within the prior larger candle's body (Correct answer)
- Three candles of progressively smaller size
- A gap between two consecutive candles
Correct answer: A two-candle pattern where a small candle's body is contained within the prior larger candle's body
A Harami (Japanese for 'pregnant') features a large candle followed by a smaller candle whose body is completely within the prior candle's range, suggesting a potential trend pause or reversal.
Question 6: In candlestick analysis, what does a 'Marubozu' candle represent?
- A candle with no body but long shadows
- A full-bodied candle with no upper or lower shadows, indicating strong directional conviction (Correct answer)
- A candle that gaps away from the prior close
- A candle where high and low are equal
Correct answer: A full-bodied candle with no upper or lower shadows, indicating strong directional conviction
A Marubozu has no wicks — the open equals the low (bullish) or high (bearish) and the close equals the high (bullish) or low (bearish), showing dominant one-sided control throughout the session.
CTA Candlestick Analysis & Japanese Techniques 2
What distinguishes a 'Spinning Top' from a 'Doji' candlestick?