CandleStick Pattern

Today i want to share 2 candlestick formation which i rely most

1) Abandon Baby Formation
2) Kicker 

Definition:
1) Abandon Baby Formation: It is a 3 candlestick pattern & need confirmation in 4 th candle. It is basically a reversal pattern. First candle is long black/white candle ,second one is gap up/down candle which can be hammer ,doji ,small body , long legged candle & third one is again gap up/down candle with body more than 2nd one.Most important aspect of this formation is gap b/w this 3 candles. thats why the name abandon baby.

Volume Aspect: 1st Candle:- Usually normal to high
                           2nd Candle:- Mostly high in rare case low volume but both are positive
                           3rd Candle :-High to medium high as compared to last 10 candles in normal case. 

2) Kicker : It is a 2 candle pattern & need confirmation in 3rd candle. It is basically a very strong reversal pattern. First candle can be any pattern but need to at least small body in uptrend or downtrend & second one can be any pattern . But whats important is opening & closing of both candles. Here i am explaining the bearish kicker . The first candle is usually a long black candle after some long down trend n closed near to low of candle with small to medium volume as compared to previous candles & second candle opens above the opening of previous candle n closes even higher than previous candle.

Volume Aspect: 1st Candle:- Usually medium as compared to last candles
                           2nd Candle:- Mostly higher n should be higher as compared to last 5 candles for    proper reversal.

I am putting some example from various market in different scenario.
Please enlarge pics if not witnessed clearly.

 

Above is the Chart of Bank nifty ,Kicker is shown in three different circle n just see after ward move

Above is chart of USDINR SPOT (weekly). Bullish Kicker & Abandon Baby both are encircled.

Above is the chart of NIFTY . There are three abandon baby formation shown in circle with one kicker not shown in chart hope u can find it. Please enlarge chart if not seen properly.   

 

 Above is the daily chart of Nifty Classic example of kicker formation with rsi divergence . Just see rally afterwards

 Above is the chart of soya refined  bearish kicker formation is witnessed.

Above is the chart of Soybean , First circle shows abandon baby formation & last circle shows bearish kicker formation. Now if u add other study with this pattern u will get stronger move like in this example there is bullish divergence in rsi. it might be a good trade setup.

    

Conclusion:

                     In all above chart one can easily witness the afterward move. Both formation when use with other trading system like divergence , trend line breakout , or moving averages can give us an early sign of reversal & it can be used for some handsome profit as risk from that level is negligible.
                 In both formation volume is the most important aspect & usually strong hand enters here as emotions n sentiments both are at their extreme. One should not avoid this signal of reversal as early sign of trend change & must review his study or strategy at once.

Divergences

 In technical analysis we  heard of term "Divergence" many times. Today we will understand some basic concept about divergence.

 Divergence : It can be define as whenever there is a misunderstanding b/w price n indicator they used to get divert from each other and moved in opposite direction to each other.

In this post i will show you 2 types of divergence :
1) Classic
2) Hidden

1) Classic Divergence: It can be define as whenever price make a new high(low) while indicator does not follow the price pattern n make lower high or higher low. It can be easily understood with an example.

Above is the hourly chart of nifty , classic divergence is shown with blue line ;Nifty made a new high after passing previous high of 8141 but not able to sustain at higher level n made a high 8180 While indicator does not make new high when nifty make New high of 8180. This is called as classic negative divergence. After which nifty falls down.
                     We can calculate divergence target also. It has many way to calculate but i will show one of my method to use for calculation. It is just simple maths ,get the highest value(highest peak(8180)) n lowest high (trough(8050)) ;  subtract trough from peak
 i.e. 8180-8050 = 130.
Now subtract it from lower end i.e.
8050-130 = 7920.This is our estimated target. Market made a low 7925 n reverse.
Another method is calculate difference b/w 2 peaks & subtract it from trough for target zone.
here first peak is 8141 & second 8180 n trough low 8050.
So, 8180-8141 = 39
8050-39 = 8011 which would be our probable target zone.

Special Note :
1) One should keep in mind that as long as difference b/w the 2 peaks(no. of candles) should be  less the more stronger would be reversal in terms of price n time both.
2)Above method is fruitful in every time frame.
3) Above calculation is for negative divergence same can be use for positive divergence ; instead of subtraction we use addition in calculation.

2) Hidden Divergence: It can be define as when indicator make a new low but price doesn't make new low this type of divergence occurs. It can easily be understood by example:

Above is the Hourly chart of Bank Nifty. There are 2 hidden divergences first one is marked with black line n second with blue line . As the name suggest they cannot be easily witness n understood once in view but with expertise one can gain big move as they are the most powerful types of divergences n usually occur in trending market n give sharp reversal as u can view in above example.

 Above is another example of hidden divergence in hourly chart of Castor Seed.In this chart one can easily witness that price doesn't make new low but indicator make a new low after that price show sharp reversal in terms of time n price both.Also there is a good support at that zone 4315-4325 range shown by horizontal blue line. Price took support at that level n bounces back .

Special Note:
1) Steeper the angle b/w peaks(troughs) in price n indicator both; more powerful reversal chances are there.
2) There is no specific(theoretical) method to calculate target but one can use both method as shown above in classic divergence for rough estimated target.

Disclaimer: Method shown above is only experienced while trading n analyzing shown here for Educational purpose;One should expertise before applying method to their trading system.
Market is subject to risk. Please consult your adviser before investing.