How to Make Money Trading with Candlestick Charts

Piercing signal in oversold

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conditions in Essar Oil
Observe the chart of GE Shipping in 
Figure
7.3
.
Figure 7.3:
Start of an up trend after a
Piercing signal in GE Shipping
The first day of the pattern was a gap down

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dark bodied candle. Given the fact that the
stochastics are in oversold condition, this
was a clue for any trader to watch closely
for a trend reversal sign. The trader at this
point should visually be imagining the panic
most investors are going through and should
be ready to act at the first signs of smart
money moving in. That sign was given the
next day with a piercing signal.
Figure 7.4
shows how the bulls reversed the
downtrend with a Piercing signal.

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Figure 7.4:
Mahindra and Mahindra going
up after a huge Piercing candle
Notice that in this case the stochastics were
not in the ideal oversold conditions.
However, one should remember that the
candlestick signal is the primary factor. The
oscillators are secondary factors. Though the

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probabilities are higher for a trend reversing
when the signal is formed in the oversold
area, the trader should not neglect these
opportunities. This is especially true in
strong trending markets when the position
never pulls back enough to get oversold.
Figure 7.5
shows the chart of Rolta India
Ltd. in the early part of June 2006.

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Figure 7.5: