Day Trading & Forex Forum

Switching to the daily chart, even at this stage in the day you would have known that if it kept this up the daily chart would form a large +BE bouncing off the moving average on closing. The 60 minute chart displayed strength, but no sign up of our favourite candlestick pattern that would provide strong confirmation.

GOOG 07/09/05 (Circled) Daily chart

It’s at this stage we turn to our market barometers (in reality we’d already have an eye on their activity). Unfortunately the QQQ provided now clues as to the broader market sentiment at the time.

QQQQ 07/09/05 60 min chart.

However our other market barometer the NDX displayed a neat +BE bouncing off the moving average on its 60 minute chart, a clear indication that the bulls might have a run in the short term. Sure enough, Google ran up a good head of steam from $295 on the close of that day to an all time high of $320.

NDX & GOOG 07/09/05 60 min chart.

Engulfing pattern conclusions

The engulfing pattern is in our opinion one of the strongest patterns available to the technical trader. We hope this guide will help you to use it within your own trading.

Conclusions:

• Engulfing patterns work best when reversing a previous trend (a V pattern).
• Look for strong volume support.
• Wait for the candlestick to close on whatever timeframe you are viewing.
• The engulfed candlestick should be the opposite colour to the engulfing candlestick.
• Look for technical support from moving average bounces.
• Drill down and up on multiple time frames to get a more complete picture.
• Seek confirmation from the broader market.