How to Make Money Trading with Candlestick Charts

Bullish engulfing signal in
overbought conditions is not a buy
scenario
The stock had a bearish engulfing signal on
May 11th. The trader should now be on
guard to take profits if the signal is

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confirmed.
On May 12th, the stock opened lower, but
then immediately headed higher. This is not
what you want to see after a bearish
engulfing signal. By the end of the day, it had
formed a bullish engulfing signal. The trader
should now start expecting a sell signal
anytime, knowing the reasoning behind this
phenomenon.
The very next day witnessed a bearish
engulfing signal, which was confirmed the
day after by more selling.
Proper use of candlestick signals can lead to
highly profitable trades. It helps the trader’s
confidence immensely if he also understands

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the psychology behind the signals.
If a bearish engulfing signal is witnessed in
an oversold condition, then the
implications of such a signal are bullish.
Take a moment to visualize what is going on
in such a case. After an extended downtrend,
smart money has started buying. This
pressure causes prices to gap up. The novice
investors, looking to take advantage of the
higher prices on the open, start selling
causing the temporary bearish engulfing
pattern. Most of the times the smart money is
strong enough to turn the tide in the reverse
direction.
Candlestick signals have stood the test of
time and made huge fortunes for those who

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have correctly utilized them. Learn to read
and analyse the chart day by day. Always
keep in mind the following two simple facts:
If you witness a candlestick sell signal in
overbought condition, it has to be
followed by more selling to prove that
the sellers are still around.
If you witness a candlestick buy signal in
oversold condition, it has to be followed
by more buying to confirm that the buyers
are forceful enough to turn the trend.
Simple as these facts may seem, they can
make or break a trader!

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7
Dark Cloud and Piercing
Signals
This chapter will describe in detail the
nuances of trading the Dark Cloud signal and
the Piercing signal. These also belong to the
class of two-day reversal signals. They are
sort of like a “semi” completed version of
the Bearish Engulfing and the Bullish
Engulfing signal, respectively.

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Piercing Signal
Description
Figure 7.1
shows a classic Piercing Signal.
As you can see, the signal is formed when a
white coloured body opens below the low of
the previous day’s trading range and closes
above the half-way point of that dark body.

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Figure 7.1: