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Japanese Candlestick signals are quick and easy.
These 12 Signals to Master any Market will improve any investor's ability to forecast price direction. Utilizing these major signals will provide more than enough trade opportunities with higher profit potential.
Each of the 12 Signals are broken into detail and provide the Illustration, Pattern Description, Criteria, Signal Enhancements, and the Pattern Psychology. As illustrated below;
BULLISH ENGULFING PATTERN
The Engulfing pattern is a major reversal pattern comprised of two opposite colored bodies. The Bullish Engulfing Pattern formed after a downtrend. It opens lower that the previous day’s close and closes higher than the previous day’s open. Thus, the white candle completely engulfs the previous day’s black candle.
1. The body of the second day completely engulfs the body of the first day. Shadows are not a consideration.
2. Prices have been in a definable down trend, even if it has been short term.
3. The body of the second candle is opposite color of the first candle, the first candle being the color of the previous trend. The exception to this rule is when the engulfed body is a doji or an extremely small body.
- A large body engulfing a small body. The previous day shows the trend was running out of steam. The large body shows that the new direction has started with good force.
- When the engulfing pattern occurs after a fast move down, there will be less supply of stock to slow down the reversal move. A fast move makes a stock price over extended and increases the potential for profit taking.
- Large volume on the engulfing day increases the chances that a blowoff day has occurred.
- The engulfing body engulfs the body and the shadows of the previous day, the reversal has a greater probability of working.
- The greater the open gaps down from the previous close, the greater the probability of a strong reversal.
After a downtrend has been in effect, the price opens lower than where it closed the previous day. Before the end of the day, the buyers have taken over and moved the price above where it opened the day before. The emotional psychology of the trend has now been altered.