This is the part two of Candlestick Patterns’ Technical Analysis: 10 Medium Bearish Reversal Signals where we discuss about Candlestick’s Bearish Reversal Signals with medium reliability. Medium reliability means that we need to wait for the technical analysis confirmations before decide to follow these bearish/sell signals (based on stocks analysis of course). The confirmations can be from the candlestick itself or from other Technical Analysis (TA) indicators.
Believe me, even though has medium reliability, these candlestick patterns are still worthy to be learned since can become a strong bearish/buy signal if combine with the technical analysis confirmations. So far, we have discussed one Medium Strength Bearish Reversal Candlestick Patterns which is Bearish Dragonfly Doji. This time, let’s discuss other two Candlestick’s Bearish Reversal Signals with medium reliability – the Bearish Long Legged Doji Candlestick Patterns and Bearish Engulfing Candlestick Patterns.
Technical Analysis of Bearish Long Legged Doji Candlestick Patterns
Bearish Long Legged Doji is a single candlestick patterns which needed only one candlestick to form the chart pattern. Bearish Long Legged Doji Candlestick patterns has the same opening and closing price while there are the long tails towards up and down. For more understanding, let’s take a look at the picture below:
As we can see, there is a candlestick with the same opening and closing price as well as the same long tail toward up and down. This candlestick patterns is called as long legged doji. The long tail tells us that the war of buyers and sellers is in strong power. The same opening and closing price tells us that the buyers and sellers has the same power even though the power is strong. This chart pattern is a neutral candlestick patterns which tells us that the stocks market is strongly indecisive.
However this long-legged doji pattern is considered as the bearish/sell signal if happened after a long/significant up trend (bearish) since it tells us that the sellers start gain enough power to fight the buyers squarely. It also means that there is a possibility that the sellers will continue to push the stocks market down in the next trading range since the buyers has started to lose their power. So, we have a bearish/sell signal in here.
But, still, the certainty is not so strong so it is suggested to wait the technical analysis confirmations before decide to sell our stocks/shares. The confirmations can be from the candlestick itself or other Technical Analysis (TA) Indicators such as Volume, Accumulative/Distribution. Stochastic, etc. For this article series, let’s utilize the candlestick based confirmation as below:
I have added a solid black candlestick and a technical analysis confirmation line in the picture above. As we can see, the stocks market is confirmed in down trend (bearish) if in the next trading range, there is a solid black candlestick with lower opening price than the white candlestick which is created right before the long-legged doji candlestick patterns. Please be noted that the confirmation candlestick mustn’t be happened right in the next day but can be in the next several days.
This technical analysis confirmation tells us that the sellers power has finally overcame the buyers power – the sellers power even stronger than the last day in where the buyers still rules the stocks market strongly. It is surely the time to sell our stocks since the price will be down in the next trading range.
Technical Analysis of Bearish Engulfing Candlestick Patterns
Bearish Engulfing is the two candlestick patterns which is needed two candlestick to form the chart pattern. Bearish Engulfing Candlestick Patterns consists of a shorter solid white candlestick and a longer solid black candlestick. It seems like the black candlestick engulfs the white candlestick. For better understanding, let’s take a look at the picture below:
From picture above, we can see that the Bearish Engulfing pattern is created by two candlestick – a white candlestick and a black candlestick. The candlestick patterns can be happened in various trading range but for simplicity, let’s assume it is happened in daily basis. In the first day, there is a solid white candlestick which tells us that the current up trend (bullish) is still there. It is considered as continuous up trend (bullish) signal indeed.
In the second day, there is a solid long black candlestick with higher opening price than the first day’s closing price and lower closing price than the first day’s opening price. This second day’s candlestick patterns tells us that in the beginning, the buyers still has enough power to push the stocks market up (shown by the higher opening price) but in the end, the sellers power overcome the buyers power so the stocks market is pushed down significantly (shown by the lower closing price and long black body).
Also that, since happened after a long/significant up trend (bullish), there is low possibility the buyers have enough power to fight back in the next trading range. So, we have the bearish/sell signal in here. However, the certainty is not so strong so we need to wait for the technical analysis confirmations before decide to sell our stocks/shares. The confirmations can be from the candlestick itself or from other Technical Analysis (TA) Indicators such as Bollinger Band, MA Envelope, Force Index, etc.
Since this article series is about candlestick patterns, let’s also use the candlestick based confirmations as below:
I have added a solid black candlestick and a technical analysis confirmation line in picture above. As we can see, the stocks market is confirmed in down trend (bearish) if in the next trading range, there is a solid black candlestick with lower closing price than the second day closing price. Please be noted that this confirmation candlestick can be happened in various days – mustn’t in the next day. This technical analysis confirmation tells us that the sellers has ruled the stocks market powerfully. So, in here, the technical analysis of Bearish Engulfing candlestick patterns tell us to sell our stocks in stocks market.
Having a profitable stocks trading everyone.