How to Read Candlestick Charts

Candlestick charts pack four numbers — open, high, low and close — into a single, readable shape. Once you can read candles, price charts stop looking like noise and start telling a story. Here's how they work for NEPSE stocks.

The anatomy of a candle

Each candle represents one time period (a day, on most NEPSE charts) and has two parts:

• The body — the thick part, between the open and the close.
• The wicks (shadows) — the thin lines above and below, marking the high and the low.

Colour tells you direction:

• Green (bullish) — the close was higher than the open; buyers won the session.
• Red (bearish) — the close was lower than the open; sellers won.

What the shape tells you

• A long body means strong conviction (a big move from open to close).
• A small body means indecision — buyers and sellers roughly balanced.
• A long lower wick means sellers pushed price down but buyers pushed it back up — a sign of buying support.
• A long upper wick means buyers pushed up but sellers rejected it — a sign of selling pressure.

Key single-candle signals

• Doji — open and close are almost equal (a tiny body). Signals indecision; often precedes a turn.
• Hammer — small body at the top with a long lower wick, after a decline. Buyers stepped in; a possible bottom.
• Shooting star — small body at the bottom with a long upper wick, after a rise. Sellers rejected higher prices; a possible top.
• Marubozu — a long body with almost no wicks. One side dominated the whole session — strong momentum.

Two-candle patterns

• Bullish engulfing — a big green candle fully "engulfs" the previous red one. Buyers took control; often a reversal up.
• Bearish engulfing — a big red candle engulfs the previous green one. Sellers took control; often a reversal down.

Three-candle patterns

• Morning star — a red candle, then a small indecisive candle, then a strong green candle. A classic bottoming pattern.
• Evening star — a green candle, a small candle, then a strong red candle. A classic topping pattern.

How to actually use them

Patterns are hints, not guarantees — and they matter far more at key locations:

• A hammer at a support level is more meaningful than one in the middle of nowhere.
• Confirm with volume — a reversal candle on heavy volume is more convincing.
• Wait for the next candle to confirm the direction before acting.
• Always read patterns in the context of the overall trend.

A candle is just open, high, low and close drawn as a shape — but the shapes, especially at support/resistance and on strong volume, reveal who's winning the fight between buyers and sellers.

NepseIQ's stock analysis automatically detects candlestick patterns and marks them on the chart for any NEPSE stock.