The Candle stick analysis, which has its origins from Japan is a prominent tool in TA. It uses daily prices that are shaped like candles. The candles’ body denotes the opening and closing prices. The candle’s tail denotes the highest and lowest price point of the day. The colour of the candle makes it easy for visual analysis. Its real time use is during intraday / weekly trading
The general forecasting duration using candlestick analysis ranges from intraday to 2-3 days and goes upto a week’s time
Engulfing patterns are patterns where there is sign of trend reversal and the start of a new trend.
Buy – Bullish engulfing – When recent fall is price is clear. Latest bullish body covers the previous day’s bearish body. Entry is when CMP crosses high tail of the bullish body. The SL is the low end of the tail
Sell – Bearish engulfing -When recent rise is price is clear. Latest bearish body covers the previous day’s bullish body. Entry is when CMP crosses low tail of the bearish body. The SL is the high end of the tail
The pattern is formed when the first candle is bullish / bearish and the second is bearish / bullish respectively. This is a type of trend reversal. Conditions are 1. The reversing trend should cover the previous day’s trend and the current day’s body should cover at-least 50% of previous body. (thus piercing). Also, the upper tail should be small. Go long on Bullish piercings and short on bearish ones.
DOJI, meaning neutral, is a trend reversal pattern that is both rare and happens after a significant rally. It happens when the difference between opening and closing prices is negligible. It is key to note that prior to DOJI an opposing trend should be observed. Long and short
