How to Make Money Trading with Candlestick Charts

Bullish Engulfing signal in
oversold condition in Essar Oil
Notice in 
Figure 6.3
how India Cement
reverses the down trend for a very profitable
trade after a bullish engulfing signal.

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Figure 6.3:
India Cement exhibiting a gap
up after forming a Bullish Engulfing signal
Observe the large black candle showing
panic selling by amateur investors. Smart
money moves in the next day to readily take
the stock from the panicky sellers. The up
tick in volume also confirms the reversal. As

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a trade, the probabilities are extremely high
that the trend is now reversed. The bulls
have stolen the thunder from the bears.
What should a buyer look for after any
bullish reversal signal? More buying! This
sounds like a simple answer and the fact of
the matter is that it is. However, most
investors and traders do not use this simple
logic. The buyer should await some
confirmation that the bulls are still in control
of the stock. It is not uncommon to see some
residual selling after a big bullish engulfing
candle. Those sellers who had held on
through the panic selling finally sell out after
seeing the price higher than the last couple of
days. For confirmation that he needs the
buyer should make sure from the chart that

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such selling is not heavy.
Figure 6.4
 shows a classic Bullish Engulfing
signal. The stochastics are in oversold
condition and the big white candle day is
accompanied by a spike in volume. As a
trader, the correct strategy is buying on
confirmation the following day.
Figure 6.4: