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Bullish Engulfing

Named for its appearance, a bullish engulfing pattern describes a small red bar that is followed by a large blue bar. The large blue bar overshadows the small bar and appears to be engulfing’ the smaller bar.

The red bar is contained within the opening and closing price range of the blue bar. The pattern is described as bullish as the bulls in the market place have taken control of the price movement.

Bearish Engulfing

The opposite of bullish engulfing, this pattern is represented by a small blue bar followed by a large red bar. The blue bar is within the length of the red bar. The large red bar overshadows the small blue bar and appears to be engulfing the smaller bar.

The bearish engulfing is one of the more clear-cut two day bearish reversal patterns. The formation shows that sellers have overtaken the buying strength and often precedes a fall in price. Bearish engulfing patterns also provide resistance levels for where the highest level of price action reached. In the future this level may be difficult to break.

Inside Bar Bullish

As you can see from the graphic an Inside Bar is a reversal pattern which has a bar that falls completely within the shadow of the previous bar (this graphic shows a bullish reversal inside bar).

If the preceding pattern is an upward trend then it is an indication that traders should take a short position or sell a long position. If the preceding pattern is a downward trend then traders should take a long position or sell a short position.

Bullish Key Reversal

A Key Reversal Bar indicates a possible reversal of the current trend. This particular pattern is a short term or basic pattern. This pattern is used predominantly by day traders or short term investors.

Key Reversal Bars can be either Bullish or Bearish depending on the direction of the preceding trend. If the preceding pattern is an upward trend then it is an indication that traders should take a short position or sell a long position. If the preceding pattern is a downward trend then traders should take a long position or sell a short position.

As you can see from the graphic the pattern has a downward trend of red bars then a blue bar indicating a change in direction of the trend this particular graphic is a bullish key reversal pattern. The pattern can also be evident when you have an upward trend of blue bars followed by a red bar this pattern would be a bearish key reversal pattern.

Exhaustion Bar

An Exhaustion Bar shows signs of the potential for a reversal of a current downward trend to a new uptrend.

The Exhaustion Bar is short term overview of a financial instrument. A reversal often follows the initial trend. These patterns can be an insight for traders seeking clear exit and entry points. Long-term investors would be more inclined to use monthly charts.

As you can see from the graphic the pattern has a downward trend of red bars then a blue bar indicating a change in direction of the trend this particular graphic is a bullish key reversal pattern. The pattern can also be evident when you have an upward trend of blue bars followed by a red bar this pattern would be a bearish key reversal pattern.

Downtrend

An Exhaustion Bar shows signs of the potential for a reversal of a current downward trend to a new uptrend.

A downtrend is the opposite of an uptrend and can last anywhere from a few minutes to a few months. Once a downtrend has been identified traders will be very cautious about entering into long term trades.

Resistance Level

The price at which a stock or market can trade, but not exceed, for a certain period of time. It is also referred to as the “resistance level”.

As you can see from the graphic the stock trades between $10 and $70 – the resistance level for this particular stock is $70.

Retracement

A retracement is a reversal in the movement of a stock’s price then a continuation in the original market direction.

As you can see from the graphic, the market was in an upward trend then temporarily shifted into a slight downward trend however the market regained confidence and the stock continued with the upward trend.

A retracement can occur in any market. The Fibonacci Retracement is a variation to this pattern.

Reversal

https://youtube.com/watch?v=pOvuZCPaG4

A reversal is a sudden change in the market direction of a stock, index, commodity or derivative security. Also described as a “trend reversal”, “rally” or “correction”, a reversal can be in either a positive direction or negative direction.