12s Engulfing Pattern

Engulfing Pattern As noted above, the hammer and the hanging candle are separate candles. warning about the change in market trend. However, the majority Other signals generated by candlestick charts are a combination of several candles. So the absorption model is one of key turn signals - consists of two candles, which, like They are usually painted in different colors.

Figure 4.18 shows a bullish takeover model. During The downward trend is a candle with a bullish white body that It covers the black body of the previous candle, as if it were absorbing it. This shows that the pressure of buyers has become greater seller pressure. In turn, in Figure 4.19 is the bear absorption model in which the white body of the first candle is completely is covered by the next black body of the second. This model occurs in a period of growing market and is a signal of reversal on top. The absorption model must meet three criteria:

1. The market shall have a marked upward or A downtrend, at least a short-term one.

2. The body of the second candle should cover the body of the first (at the same time shadow absorption may not occur).

3. The colour of the second body shall be different from that of the first. Exception only if the first candle has so a miserly body that resembles a doji or is a doji. Taku if after a long downward trend A tiny white body is absorbed by another white body, but very A big one, you can talk about the turn signal at the base. When The uptrend is the absorption of a very small black body The big black will serve as a turning signal at the top. In Western technical analysis, the closest model analogue The takeover is the reversal day. This is the day when the An upward (or downward) trend is achieved by a new price maximum (minimum), but the auction ends at the level below (above), than the closing price of the previous day. However, the absorption model Even then, you can get signals about the upcoming trend change when There is no need to speak about the coming of the day of turning. It will be seen, for example, in figures 4.21, 4.22 and 4.23.

The factors that increase the likelihood of a change are listed below market trend after a pattern appears on the graph acquisitions:

1. If the first candle of the model has a very short body, and the second one — very long. This shows that the old trend it's weakening, and the new one's gaining strength.

2. If the absorption model is formed after a long trend either, on the contrary, after the sharp movement of the market. In the first case, many potential buyers have already managed to take long positions (or sellers - open short), so you can hardly expect a large number of new purchases (sales) that are necessary for maintaining the trend. In the second case, the market becomes very sensitive to fixing profits, which is highly likely after a rapid rise or fall in prices the day before.

3. If the second candle of the absorption model occurs against the background of the high volume of trading. This may be a sign of a situation that sometimes Called "blow off": right after a sharp jump The market is also rapidly retreating back. To questions Relationship between candle analysis models and trading volumes We'll come back to chapter 15.

4. If the second candle of the absorption model overlaps immediately several previous bodies. In Figure 4.20 you can see two consecutive candles (for weeks, (those that started on May 15 and May 22) formed a bullish takeover model, and then In the last weeks of July a bearish model appeared. Finally, one more The pattern of absorption, this time bullish, formed in September and served the starting point for a long rally. The oil graph shown in Figure 4.21 clearly shows bullish and bearish takeover models. At the end of 1985, a sharp $20 drop, followed by two candles in March and April 1986 formed a bullish takeover model. The rally that started with it It continued until the bearish takeover model emerged in the middle 1987, and then the downward trend that, in its The queue ended with a small bullish takeover model at the beginning 1988 Then, for five months, there was sideways price movement. The body of the black candle, which appeared in February 1990, was not enough 8 Tics for the absorption of the January white body, and therefore the ideal The absorption model did not work. But again, Candlelight analysis, like other technical tools, allows There are some exceptions to the rules (and therefore there is always a stake in it) subjectivity). It made much more sense not to ignore this combination candles, and consider it as a signal about the reversal of the trend. In this illustration, the bearish takeover models of 1987 and 1990. demonstrate their advantage over the "turn day" indicator, Because only they signaled a future trend change. Price The candles must rise to a new high and then fall to The day of turning on the top (or, as in this case, a month) A U-turn on the top.) But here the black candles did not reach the previous ones price highs, and thus a reversal, could have been predicted only bear candle models. The example in Figure 4.22 also shows the superiority of candles over Barometric charts. Please note the price dynamics on July 7 and 8, which were not days of turning, because there were no days of turning. New price records were recorded. At the same time on a candlestick chart a bearish takeover model has emerged, signaling a likely trend reversal. On the same chart, candles 1 and 2, which appeared in early June, resemble a bullish takeover model. But this model is trend reversal indicator in the base, which means formed on falling market (or sometimes at the lower bound of the side trading range). In this case, the market did not show a decline, so No action should have been taken after this candle combinations. Figure 4.23 shows a series of bearish takeover models, the first Of which the uptrend was interrupted and the market was directed to the sideways The corridor was closed for several months, and the second only briefly interrupted the rally at the time. Bearish Takeover Models 3, 4, and 5 They gave signals about a trend reversal that could not be detected Alternatively: in all these cases the second candle of the model is not reached the price high, so could not be considered a week spread.