How to Make Money Trading with Candlestick Charts

Manali Petro’s Bearish
Engulfing signal produces quick profits
Stochastics near the overbought area should
have alerted the astute trader that exuberant
buying was taking place. All the trader needs
now is to patiently wait for the sell signal.
On completion of the bearish engulfing
signal, the trader should either sell his or her

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shares or employ any number of other
bearish strategies. Another high probability
scenario to be taken advantage of!
Figure 6.11
shows the Nifty index reversing
its up trend after a bearish engulfing signal.
Figure 6.11:
A Bearish Engulfing signal

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takes down the Nifty
Stochastics indicated that the index was in an
overbought condition. This created a high
probability situation for trend reversal. If
you do not want to trade the index itself, you
can find stocks which are exhibiting sell
signals at this time. With the market index
showing a bearish engulfing pattern, there is
a high probability that the component stocks
with a bearish reversal signal will make for
a profitable trade to the downside.
Candlestick signals are universal. They can
be applied to indexes as well.
Exceptions
There is one unique set-up that sometimes

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occurs the trend of bullish and bearish
engulfing patterns, which can be summarized
as follows.
If a bullish engulfing signal occurs when
the stock is in an overbought condition,
then the signal has bearish implications.
This is usually referred to as 
last-gasp
buying
. The novice investors seeing the
price gap down are thrilled to get into the
stock. Their enthusiasm drives the stock
price higher for the day causing the bullish
engulfing pattern. Unfortunately, the smart
money is selling their stock. The trader must
now be alert for signs that the trend is about
to turn down.
Let us analyse the chart of Nagarjuna

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Fertiliser and Chemicals Ltd (
Figure 6.12
),
for the three days starting May 11th.
Figure 6.12: