Candlestick Patterns

Q1. (4 marks) — Candle anatomy

• Real body = distance between open and close = $C - O$ for a bullish candle. (1)
• Upper wick (upper shadow) = distance from high to top of body = $H - C$ (since C is top for bullish). (1.5)
• Lower wick (lower shadow) = distance from bottom of body to low = $O - L$ (since O is bottom for bullish). (1.5)

Why: For a bullish candle the close sits above the open, so the body top = C and body bottom = O.

Q2. (4 marks) — O=100, H=112, L=98, C=108

• Bullish since C(108) > O(100). (1)
• Body = $108 - 100 = 8$. (1)
• Upper wick = $H - C = 112 - 108 = 4$. (1)
• Lower wick = $O - L = 100 - 98 = 2$. (1)

Q3. (5 marks) — Doji

• Definition: a candle where open and close are (virtually) equal, giving a very small/near-zero real body; signals indecision. (2)
• Any three variants (1 mark each, max 3):
  • Standard/neutral doji — small equal upper and lower wicks (cross shape).
  • Long-legged doji — long wicks on both sides, extreme indecision.
  • Dragonfly doji — open/close/high near top, long lower wick, no upper wick (bullish bias at bottoms).
  • Gravestone doji — open/close/low near bottom, long upper wick, no lower wick (bearish bias at tops).

Q4. (4 marks) — Hammer vs Hanging Man

• (a) Common shape: small real body near the top of the range with a long lower wick (≈ twice body) and little/no upper wick. (2)
• (b) Context/signal:
  • Hammer appears after a downtrend → bullish reversal signal. (1)
  • Hanging man appears after an uptrend → bearish reversal signal. (1)

Q5. (4 marks) — Shooting Star

• Small real body located near the low of the range. (1)
• Long upper wick (≈ twice the body), little or no lower wick. (2)
• Appears after an uptrend → bearish reversal signal. (1)

Q6. (4 marks) — Bullish Engulfing

• Definition: a two-candle bullish reversal pattern occurring after a downtrend; a large bullish candle engulfs the previous small bearish candle's body. (2)
• Conditions for candle 2 (bullish):
  1. Opens below the previous candle's close (lower than prior close). (1)
  2. Closes above the previous candle's open, so its body fully engulfs the prior body. (1)

Q7. (4 marks) — Dark Cloud Cover midpoint

• First bullish body runs from O=50 to C=60; midpoint = $(50+60)/2 = 55$. (2)
• The bearish close must penetrate more than 50% into the body, i.e. close below 55. (1)
• Maximum qualifying close = just under 55; the highest boundary value is $X = 55$ (the limiting value; a valid close must be < 55). (1)

Q8. (4 marks) — Morning Star

• Three-candle structure: (3)
  1. A long bearish candle (downtrend continues).
  2. A small-bodied candle (star) that gaps down — indecision.
  3. A long bullish candle closing well into the first candle's body.
• It is a bullish reversal pattern. (1)

Q9. (3 marks) — Marubozu vs Spinning Top

• Marubozu: long real body with no (or negligible) wicks — strong directional conviction. (1.5)
• Spinning top: small real body with long wicks on both sides — indecision/balance between buyers and sellers. (1.5)

Q10. (4 marks) — Tweezer Top + context

• Tweezer top: two (or more) consecutive candles making matching/equal highs at the top of an uptrend, signalling a bearish reversal. (2)
• Context improves reliability because a pattern's signal depends on its location within a trend (e.g., a hammer only means bullish reversal after a downtrend); confirmation from support/resistance, volume, or prior trend reduces false signals. (2)

[
  {"claim":"Q2 body length is 8","code":"O,H,L,C=100,112,98,108; result=(C-O)==8"},
  {"claim":"Q2 upper wick is 4 and lower wick is 2","code":"O,H,L,C=100,112,98,108; result=((H-C)==4) and ((O-L)==2)"},
  {"claim":"Q7 midpoint of first body (50,60) is 55","code":"result=((50+60)/2)==55"},
  {"claim":"Q2 candle is bullish (C>O)","code":"O,C=100,108; result=C>O"}
]