What does a candlestick pattern tell you, and what does it not?

A hammer, an engulfing, an evening star: candlestick patterns have evocative names, and that is their trap. A name that sounds like an omen is not one. A pattern describes the shape of a few candles. It does not say what comes next.

What the site measures

The site looks for 13 classic patterns on every tracked stock, on daily, weekly and monthly candles. When it finds one, it shows it on the chart with the candles that form it, and it says for each one whether its reliability has been measured on past data:

When the measurement exists, it compares what followed the pattern with what the other stocks of the same market did on the same dates: a gap, not a raw return. When the sample is too small, the page says “never measured” or “not yet measurable”, and stops there. Patterns do not enter the score.

What the measurement does not say

• What the price will do. A bearish engulfing describes two candles. The price can turn up again from the very next one.
• That a measured pattern will repeat. A gap observed in the past describes the past, on that sample. It does not guarantee the next occurrence.
• That an unmeasured pattern is worthless. It simply does not have enough precedents for anything to be said about it. The site stays quiet rather than guess.

How to use it

As a quick description of the chart: the pattern draws the eye to the latest sessions. The decision is made with the rest, the trend, the volume, and what you know about the company.