Candlestick Strategies 4

 “Downturn” (below ) provides an example in Caterpillar. On March 12, 2013, Caterpillar formed a bearish engulfing pattern that engulfed the previous day’s candle completely and gave an indication of the subsequent correction — during this case, one which continued until April 18. As for entry strategy, the trader Shouldn‘t short sell on March 12 but wait for the day’s low to become broken and sustained for any subsequent trading session. Entry confirmation came on March 13, and also a short sell could possibly be initiated regarding that day. A reasonable stop loss could happen to be placed in the March 12 high, or $91. 16.

Hammer

The hammer candlestick pattern forms following a prolonged downtrend. It is taken into account a robust reversal signal. Upon the day from the hammer candle, There‘s strong selling like the market opens up. Like the day goes on, however, the marketplace recovers and closes close to the unchanged mark, or in some instances even higher.

American International Group (AIG ) provides a very good example from the hammer formation (see “Trend shift, ” below ). On June 24, AIG formed a hammer pattern following a prolonged downtrend. The stock opened at $43. 01 created a coffee of $41. 53 before closing at $42. 30. Although the stock stabbed lower, it recovered and closed near its opening price, indicating that buyers came in in the lower levels.

A reasonable entry point for that particular hammer pattern could be in the high of June 23 at $43. 04. On June 25, AIG opened at $42. 85 and when $43. 01 was broken, longs could happen to be initiated having a stop loss in the June 23 low of $41. 53. AIG inside the coming sessions made a higher of $46. 83.