How to Make Money Trading with Candlestick Charts

Shooting Star in Tata
Teleservices starts its downtrend
The Shooting Star formation in overbought
conditions and with above average volume
gives a candlestick trader the perfect
opportunity to enter into a short side trade.
When would a trader enter the market in this

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case?
Keep in mind that you are always looking for
confirmation of the candlestick signal. This
was provided by the bears the following day
by closing the price below the low of the
Shooting Star. The trader would have been
handsomely rewarded for his chart analyzing
talents in this case.
Figure 5.8
 shows a Shooting Star formation
in Dr. Reddy’s Laboratories chart.

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Figure 5.8:
Dr. Reddy’s heads south after a
Shooting Star signal
This was a perfect Shooting Star followed
by confirmed selling the next day. The
stochastics turned down, also confirming the
start of the downtrend.

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Notice the chart in 
Figure 5.9
showing an
imperfect Shooting Star formation in Nocil.
Figure 5.9:
Bulls fail to hold on after the
Shooting Star signal in Nocil
There is a tiny lower shadow in that
Shooting Star. Given the size of the upper
shadow, that length of lower shadow is
acceptable. Notice the Shooting Star did not

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confirm the next day as it was a Doji /
Spinning Top. Correct entry point would be
to enter the short trade after these signals got
confirmed to the downside with a bearish
candle.
We have now covered the major one-day
reversal signals. The important point to
remember about them is to wait for
confirmation. In the next couple of chapters
we will focus on and analyze the major two-
day candlestick reversal patterns.

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6
Engulfing Signals
There are two types of engulfing signals
defined by candlestick formations. These
belong to the two-day reversal patterns. We
will first look at Bullish Engulfing pattern.

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Bullish Engulfing
Description
Figure 6.1
shows a classic Bullish Engulfing
signal.
Figure 6.1: