| Date |
Open |
High |
Low |
Close |
Total Trd Qty |
| 01-Jun-07 |
1364 |
1385 |
1356 |
1378.9 |
1908666 |
| 04-Jun-07 |
1400 |
1418.4 |
1390 |
1406.4 |
2182423 |
| 05-Jun-07 |
1400 |
1444.85 |
1393 |
1436.5 |
1808672 |
| 06-Jun-07 |
1445 |
1454 |
1381 |
1389.5 |
1857287 |
| 07-Jun-07 |
1382 |
1401.9 |
1353.25 |
1360.65 |
2148431 |
| 08-Jun-07 |
1331.3 |
1387 |
1321.3 |
1356.6 |
2037482 |
Analysis: Bearish engulfing pattern forms in a bull trend and indicates reversal of the bull trend. From the OHLC data it is being observed that the 6th June 2007 high is higher than the 5th June 2007 high, the 6th June 2007 low is lower than the 5th June 2007 low. The closing of the 6th June 2007 is lower than the opening. Hence it confirms the formation of bearish engulfing pattern.
Pattern break out: on 6th June 2007 the high to low price range is 1454-1381=73. The 78.6% (i.e. the Fibonacci retracement ratio) of the price range is 57.37. The pattern break out will happen at a price of 1381 – 57.37= 1323.63 . As long as the price maintains above this level one can assume that the throwaway can happen at any stage.
Target: Engulfing pattern target is unlimited until and unless the price does not form any bullish reversal candle pattern in the chart. In more than 50% cases the throwaway happens before giving a break out in this pattern.
Volume: volume use to be moderate in the engulfing day. Sudden rise in volume you can observe in the pattern break out day.
Pattern failure: if the price moves above 1454+57.37 = 1511.37 then we say the bearish engulfing pattern is a failure.
What will be entry and exit point?
It is advisable to enter a short trade on the day following the engulfing day with a price above the break out point having stop loss at the pattern failure price point. The target will be unlimited until and unless it has not formed any contradictory reversal pattern. It is also advisable to make an entry after you encounter a break has happened for better result. In our case the pattern has failed to give a break out and became a failure in the future days.
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