This video is going to feature bullish and bearish and golfing candles.
So this is a two pattern to Candlestick pattern.
Essentially what you have is you have a candlestick that gets followed by a much bigger candlestick
whether it's bullish or bearish.
Depends on what the trend had been previously.
So for example what you're looking at here is one of two things depending on the colors of the candlesticks
you're really looking at a downtrend which the next day may have gapped lower and then shot much higher.
And think about what that does.
That wipes out the sellers from the day before and most of the time a couple days before if it's a truly
large engulfing candlestick it'll do a lot of damage in a very short amount of time.
You know you gap lower and the market just turns right back around that scares a lot of people who are
short.
If we're going long and it ends up being a bearish candlestick this would be red then it's a rally you
get a quiet day you get a gap higher so everybody's happy because I think it's going to continue and
then all of a sudden something horrible happens to price action and you wipe out several days there
does need to be a gap though because the second candle needs to engulf the other one so it has to be
higher and lower than the previous candlestick on this chart here of Yelp.
I've got a couple Bullish Engulfing Candlesticks.
You can see that clearly swallows the candlestick before and so does that.
So how do we trade it.
Well the stop loss goes on the other side of the candlestick because if we were to turn around and wipe
out this candlestick that would be a very negative sign as far as the entry is concerned it's just simply
a break of the candlestick and you see both times it's worked out for nice profitable trading afterwards
with the berries candlestick and this isn't as extreme of an example but it certainly is a valid one.
You can see that we had a couple of candlesticks here that got swallowed by this one.
And what I also like about this is that there is a shooting star right here and then this.
So on a break below the bottom of this candlestick your stop loss is above this candle and you continue
to go lower and these happen enough that you see them quite often on charts.
Now there I don't want to say they're common.
Reasonably common there.
They're not.
I wouldn't call them rare because they do happen.
But when you look through daily charts a lot of times you'll see them pop up and then you look back
at the chart and go Oh yeah.
There was a reversal area there.
And you know in hindsight it's always 20 20.
That's the thing about these things you have to trust the patterns you have to know that over time they
work out.
There's a slight one there.
This
chart here shows quite a few close like for example.
This is close but no cigar.
This would be a bullish engulfing candlestick not my favorite kind though because I really like to see
the more pronounced it is obviously the more interesting it is because you wanted to a cat to catch
enough people's attention that the market moves right along with you you know there are enough people
out there going Hey this is a cell signal like this city one was pretty negative your stop loss goes
up here you've got all the way down to the previous resistance level before it turned back around you
know you also want to when you trade these.
So this is a perfect example of one that although it is a nasty bearish and golfing candlestick you
would know that somewhere right here around 70 you're probably going to see some buyers due to the previous
resistance.
Well at this point this is a candlestick that makes you risk three dollars and 90 cents to pick up two.
So that's not a trade.
I mean it's doable but the risk of reward just isn't there.
Clearly though with that volume that probably attracted a lot of people I suspect that they probably
shorted it took some profits based upon some news or something but that is an example of looking at
just the candlestick and how much trouble it can get you in.
This is technically a bearish engulfing candlestick but look at all of this support just below.
So do you really wanted to risk a couple bucks to pick up say 50 cents and now you have to use some
common sense but they are excellent signals when they do happen especially when you have some room to
run.
I like them when they show up and at various extremes so with that being the case take a look on.
Typically the the daily charts you will get them perhaps on an hourly chart at the open.
But this is generally a daily or even weekly signal that people will use to determine the trend.
And then if they are shorter term traders use it as a guideline as to how to enter the markets.