Level 1 — RecognitionCandlestick Patterns

Candlestick Patterns

⏱ 20 minutes30 marksprintable — key stays hidden on paper

Chapter: 3.2 Candlestick Patterns Difficulty Level: 1 — Recognition Time Limit: 20 minutes Total Marks: 30

Section A — Multiple Choice (1 mark each) [10 marks]

Q1. The rectangular portion of a candlestick between the open and close price is called the:

(a) Wick
(b) Shadow
(c) Real body
(d) Tail

Q2. A single candle with a very small real body and long upper and lower shadows, showing indecision, is a:

(a) Marubozu
(b) Spinning top
(c) Hammer
(d) Bullish engulfing

Q3. A candle with no shadows (open and close are at the high/low extremes) is a:

(a) Doji
(b) Marubozu
(c) Harami
(d) Shooting star

Q4. A hammer appearing after a downtrend is considered a ______ signal, while the same shape after an uptrend (hanging man) is a ______ signal:

(a) bearish; bullish
(b) bullish; bearish
(c) bullish; bullish
(d) neutral; neutral

Q5. A shooting star is characterised by:

(a) Long lower shadow, small body near the top
(b) Long upper shadow, small body near the bottom, after an uptrend
(c) No body at all
(d) Two candles of equal size

Q6. A bullish engulfing pattern requires:

(a) A small green candle followed by a larger red candle
(b) A small red candle whose body is fully engulfed by a larger green candle
(c) Three consecutive green candles
(d) A doji followed by a hammer

Q7. The morning star is a ______ reversal pattern made of ______ candles:

(a) bearish; two
(b) bullish; three
(c) bearish; three
(d) bullish; two

Q8. Three consecutive long green candles, each closing higher and opening within the previous body, form:

(a) Three black crows
(b) Rising three methods
(c) Three white soldiers
(d) Tweezer bottoms

Q9. A harami cross differs from a standard harami because its second candle is a:

(a) Marubozu
(b) Doji
(c) Long green candle
(d) Hammer

Q10. Dark cloud cover is a bearish pattern in which the second (red) candle closes:

(a) Below the prior candle's low
(b) Above the prior candle's high
(c) Below the midpoint of the prior green candle's body
(d) Exactly at the prior close

Section B — Matching (1 mark each) [8 marks]

Q11. Match each pattern (i–viii) in Column A with its correct description (A–H) in Column B. Write your answers as pairs (e.g., i–C).

Column A (Pattern)	Column B (Description)
i. Doji	A. Long lower shadow, small body at top, bullish after downtrend
ii. Inverted hammer	B. Two candles sharing the same high, bearish reversal
iii. Tweezer top	C. Open ≈ close, cross-shaped, signals indecision
iv. Evening star	D. Long upper shadow, small body at bottom, bullish after downtrend
v. Hammer	E. Three-candle bearish reversal at a top
vi. Bearish engulfing	F. Small green body inside a prior large red body
vii. Bullish harami	G. Large red body engulfs prior small green body
viii. Falling three methods	H. Long red candle, small counter-trend candles, then long red continuation

Section C — True / False WITH Justification (2 marks each) [12 marks]

(1 mark correct T/F, 1 mark valid justification)

Q12. "A doji always confirms a trend reversal on its own." — True or False? Justify.

Q13. "In a piercing line, the second candle is green and closes above the midpoint of the previous red candle's body." — True or False? Justify.

Q14. "The rising three methods is a bullish continuation pattern, not a reversal pattern." — True or False? Justify.

Q15. "A long upper wick means buyers dominated and pushed the price up to close near the high." — True or False? Justify.

Q16. "Three black crows signal a bearish reversal when they appear after an uptrend." — True or False? Justify.

Q17. "Candlestick patterns are more reliable when read together with the surrounding trend and support/resistance context than when read in isolation." — True or False? Justify.

Answer keyMark scheme & solutions

Section A — MCQ (1 mark each)

Q1 — (c) Real body. The body spans open→close; wicks/shadows are the thin lines above and below. (1)

Q2 — (b) Spinning top. Small body + long shadows on both sides = indecision. A marubozu has no shadows; a hammer has one long lower shadow only. (1)

Q3 — (b) Marubozu. "Marubozu" = shaved/bald; no wicks because open and close equal the extremes. (1)

Q4 — (b) bullish; bearish. Identical hammer shape is bullish at the bottom of a downtrend, bearish (hanging man) at the top of an uptrend — context decides. (1)

Q5 — (b) Long upper shadow, small body near the low, appearing after an uptrend = bearish reversal. (1)

Q6 — (b) A small red body followed by a larger green body that fully engulfs it. (1)

Q7 — (b) bullish; three. Morning star = down candle, small star, strong up candle = bullish reversal. (1)

Q8 — (c) Three white soldiers. Three strong rising green candles = bullish reversal/continuation. (1)

Q9 — (b) Doji. Harami cross's second candle is a doji, showing stronger indecision. (1)

Q10 — (c) The red candle opens above the prior close and closes below the midpoint of the prior green body. (1)

Section B — Matching (1 mark each)

Q11 Answers:

i – C (Doji: open≈close, indecision) (1)
ii – D (Inverted hammer: long upper shadow, small body at bottom, bullish after downtrend) (1)
iii – B (Tweezer top: two candles sharing same high, bearish) (1)
iv – E (Evening star: three-candle bearish reversal at a top) (1)
v – A (Hammer: long lower shadow, bullish after downtrend) (1)
vi – G (Bearish engulfing: large red engulfs prior small green) (1)
vii – F (Bullish harami: small green body inside prior large red) (1)
viii – H (Falling three methods: long red, small counter candles, long red continuation) (1)

Section C — True/False + Justification (2 marks each)

Q12 — False. (1) A doji only signals indecision; it needs confirmation from the next candle and trend context to imply a reversal. (1)

Q13 — True. (1) Piercing line: bullish second candle opens below prior low/close and closes above the midpoint of the prior red body (but not fully above it — that would be engulfing). (1)

Q14 — True. (1) Rising three methods pauses inside an uptrend (small counter-trend candles) then resumes upward — it continues the existing bullish trend rather than reversing it. (1)

Q15 — False. (1) A long upper wick means buyers pushed up but sellers rejected the price back down, so the close is below the high — sellers dominated the top, a bearish sign. (1)

Q16 — True. (1) Three consecutive long red candles after an uptrend show sustained selling and signal a bearish reversal. (1)

Q17 — True. (1) Patterns gain reliability when confirmed by trend direction and key support/resistance levels; isolated patterns produce more false signals. (1)

[
  {"claim":"Piercing line second candle closes above midpoint of prior red body (e.g. prior open 100, close 90, midpoint 95; second close 96 > 95)","code":"prior_open=100; prior_close=90; midpoint=(prior_open+prior_close)/2; second_close=96; result = (midpoint==95) and (second_close > midpoint)"},
  {"claim":"Dark cloud cover second candle closes below midpoint of prior green body (prior open 90 close 100 mid 95; second close 93 < 95)","code":"prior_open=90; prior_close=100; midpoint=(prior_open+prior_close)/2; second_close=93; result = (midpoint==95) and (second_close < midpoint)"},
  {"claim":"Three white soldiers involves 3 rising candles; morning star involves 3 candles","code":"three_white=3; morning_star=3; result = (three_white==3) and (morning_star==3)"},
  {"claim":"Marubozu has zero shadow length (high==max(open,close), low==min(open,close))","code":"o=100; c=110; high=110; low=100; upper=high-max(o,c); lower=min(o,c)-low; result = (upper==0) and (lower==0)"}
]