After Bullish Engulfing don't buy!!Hi Folks,
How are you doing?
When you see a bullish engulfing pattern emerging on a low price area on the daily chart, what is going on in you then ?
Do you want to buy immediately? Before I educated myself I have made this mistake very often and it cost me a lot of money.
Instead of buying after a bullish engulfing I use it as a support indicator.
On the daily chart you see a bullish engulfing pattern. That is bullish.
But when you look at the 4 hour chart and the 3 hour chart you see divergence.
First of all the uptrend is constructing and these 3 candlesticks come with a high and low shadows.
This tells that the market has lost direction.. at the top at resistance level the candle comes in the form of a shooting start (bearish).
2 rules for a shooting star to be valid are;
* there must be a trend to reverse. There is.
* the shadow must be 2 times the length of the body. It is.
Now I think it will reverse.. there is a good possibility. The 1st support level is at the half of the length of the bullish engulfing pattern (daily chart).
That is at price level $0.41/0.42.- When it breaks here it will come down to $0.38/0.39.- $0.37/0.35.-
I'll be interested to jump in around one of these levels. When it hits level 1 I will look back in to the chart to analyse it.
