CANDLESTICKS

Page 8

Bullish Engulfing Formation:

Bullish Engulfing pattern usually occurs at the bottom of a downtrend or consolidation range at levels of support. It forms when a small red candlestick is followed by a large green candlestick that completely 'engulfs' the body of the previous candlestick.

The Bullish Engulfing pattern indicates a change in sentiment from a bearish decline, to a large green body candle that advances and closes at the highs of the previous candle. Buyers step in after the open and take control of the market. Generally, the greater the engulfing, the more bullish the reversal. Large volume during the period in which the green candle forms, is an important confirmation of the short term reversal.

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Bearish Engulfing formation:

Bearish Engulfing pattern usually occurs at the top of a downtrend or consolidation range at levels of resistance. It forms when a small black candlestick is followed by a large white candlestick that completely "engulfs" the body of the previous day's  candlestick.

The Bearish Engulfing pattern indicates a change in sentiment from a bullish advancement, to a large red body candle that closes at the lows of the previous candle. Sellers take control after the open and dominate price action. Generally, the greater the engulfing, the more bearish the reversal. Large volume during the period in which the red candle forms, is an important confirmation of the short term reversal.

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