A single candlestick represents prices for the open, close, high and low of the time period the chart is displaying. The color of the candle determines if the closing price was higher or lower than the opening price. A white candle indicates that the close was higher than the open and the reverse is true for a red candle.
Chart A is a recent daily chart of Verizon.
If we have a series of candles in an ascending or descending sequence, we can easily draw trend lines to show the momentum direction of the stock. Chart B shows Pacific Gas & Electric with trend lines.
There are a number of candlestick patterns that indicate potential tops and bottoms. The first one we will examine is called The Doji. See Chart C for a top reversal Doji on the General Electric chart.
In Chart D, for Honeywell, we see a Doji at the bottom after a steep downtrend. The next two days confirm that a new uptrend is taking place.