Technical Pillar | Spoke 6 | Updated April 2026
Home » Technical Analysis » Candlestick Analysis
BR
Authored by Brian Rosemorgan
Retired Professional Trader | 8+ Years Experience | South Africa
Candlestick Analysis: Reading the Language of Price
Think of Technical Analysis as finding a door (Support/Resistance) and Candlestick Analysis as the Key that unlocks it. Candles like Pin Bars and Engulfing bars tell you when the market has officially rejected a price, giving you a high-probability entry signal with a tight stop-loss.
1. The Pin Bar (The Rejection King)
The Pin Bar is characterized by a very long “tail” or wick and a small body. It shows that the price tried to move in one direction but was violently pushed back by the opposing force.
- Bullish Pin Bar: Long lower wick. It means sellers tried to crash the price, but buyers stepped in and drove it all the way back up.
- Bearish Pin Bar: Long upper wick. It means buyers tried to rally, but big institutional sellers slammed the door.
2. Engulfing Candles (The Momentum Shift)
An engulfing candle occurs when a candle’s body completely “eats” or overlaps the previous candle’s body. It signals a total takeover of the market sentiment.
- Bullish Engulfing: A small red candle followed by a massive green candle. It signals that the downtrend is dead and bulls are back in charge.
- Bearish Engulfing: A small green candle followed by a massive red candle. This often marks the start of a sharp drop.
3. Dojis: The Sound of Indecision
A Doji has a cross-like shape because the opening and closing prices are almost identical. It tells you the market is in a “Stalemate.” When you see a Doji at a major resistance level, it’s a warning that the current trend is losing steam and a reversal might be coming.
4. The “Location” Rule: Context is Everything
A Pin Bar in the middle of nowhere is just a candle. But a Pin Bar that touches a Daily Support Level or a 200 SMA is a high-probability trade. Never trade candles in isolation; only trade them when they occur at “Value Zones.”
5. Entry and Stop-Loss Mechanics
| Pattern | Entry Point | Stop Loss Placement |
|---|---|---|
| Pin Bar | Break of the nose (high/low) | Just behind the long wick. |
| Engulfing | Close of the engulfing candle | Beyond the low/high of the pattern. |
Brian’s Pro-Tip: “I always wait for the candle to close. Many beginners see a pin bar forming and jump in early, only to see the candle turn into a full-bodied candle by the end of the hour. In trading, patience pays. Wait for the close, confirm the rejection, and then place your order.”