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Candlestick Patterns in the Gold Market

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108 views

Candlestick Patterns in the Gold Market

Uploaded by

aiman.elahi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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NUST Business School

Fin 329 – Behavioral Finance

Assignment 2 – Candlestick Patterns

Submitted to:
Dr. Nabeel Safdar

Submitted by:
Aiman Elahi (344158)
BS ACF 21, B
Candlestick patterns identified in the Gold market, as on tradingview.com:
1. Three Black Crows:

Meaning and Prediction: Three Black Crows indicate a bearish reversal in the market,
predicting a downturn. They predict that the market will reach a lower low and likely stay
bearish until a new higher high is reached. The prediction was correct in this case, as the market
fell from USD 2720.269 to USD 2672.163 from Sunday, Nov 24th, to Monday, Nov 25th.
Justification: The black crows indicating market reversal is justified as a strategy because it
indicates consistent and consecutive selling pressure and suggests that bullish momentum is
weakening i.e. loss of bullish confidence and more bearish confirmation.

2. Bearish Engulfing:

Meaning and Prediction: Bearish engulfing occurs when a candle completely engulfs the
opening and closing of the previous bullish or bearish candle, reinforcing a bearish trend in
either case. In this case, it indicates a victory for sellers after a short correction period. This
prediction is correct because the dramatic selling volume decreased the price of gold from USD
2678.656 to USD 2641.469 during just one day, Monday, November 25th.
Justification: This strategy, predicting a continued bearish trend, is justified because it shows
a decisive selling trend, indicated by the high trading/selling volume (represented by the
significantly long length of the candle).

3. Hanging Man:

Meaning and Prediction: This is a single-day pattern in which a small real body appears near
the top of the trading range, accompanied by a long lower shadow and little to no upper shadow.
This typically shows in a correction phase, predicting that the market will dramatically flow in
its dominating trend when the correction phase ends. In this case, this dominating trend is
dramatically bearish, as the market dropped to USD 2626.713 at 6 p.m. after correction.
Justification: This strategy is justified in predicting that the dominant bearish trend will show
post-correction because the long lower shadow reflects significant intraday selling pressure,
suggesting that bears dominate. In other words, it reversed the market to its bearish momentum
after a short correction period.

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