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Chapter 9, Part V. Double Deuce – dual candlestick patterns. Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Engulfing Patterns

    Commander in Pips: Ok, the next one is engulfing patterns. Let’s take a close look, say, on Bullish engulfing. The mirror pattern is Bearish engulfing. So, they are quite similar as Piercing and Dark Cloud Cover correspondingly. In fact, they are quite the same, but even stronger, because Engulfing patterns suggest that the body of second candle not just close after the middle of the first one, but totally engulfs it. Look at this:

    [​IMG]

    This pattern visually shows total conquest of the bears by bullish price action. While during a Piercing pattern the bulls have the power to return the bears into the body of the previous black candle, here we see that bears have been pushed out even outside of previous black candle. The sense of Engulfing pattern the same as Piercing, the difference is only that Engulfing pattern is more powerful.



    Criteria of Bullish Engulfing pattern


    - The less the first candle and the greater the second one – the more powerful the Engulfing pattern;

    - Perfect Engulfing pattern assumes that the body of second candle should totally overcover the first one, including the shadows of the first candle. This condition also assumes that market should create lower low and higher high with second candle;

    - At the same time, it’s allowably that the body of second candle engulfs only the body (without shadows) of the first candle. But still, the trading range (High-Low) of the second candle should be greater, or at least no less than the first candle. This is the kind of pattern you can see most of times;

    - If the bodies of both candles are almost equal, then Engulfing pattern is weaker and could lead to sideways price action and not to reversal.

    - If the market will close above the high of a Bearish engulfing or below the low of a Bullish engulfing then this pattern is treated as failed one;

    - Pattern is treated as a triggered one, when the market will show close below the low of a Bearish engulfing and above the high of a Bullish engulfing.

    - If Engulfing pattern appears after a Doji, this makes it even stronger.
     
    #1 Sive Morten, Dec 15, 2013
    Lasted edited by : Feb 19, 2016
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