Answer to Exercise 8
#5 is the only correct answer.
It is a
long engulfing pattern.
#6 is a
short engulfing pattern.
I am amazed at the quality of the answers.
All I asked for was the number of the candle, but everyone also gave an analytic commentary as to the nature of the candles.
This is excellent.
It shows that readers are learning, and developing correct visual trading skills as well.
To Jimmy Jones :
I am sure you are familiar with the trading terms - going short (trading down) and going long (trading up).
Now an engulfing pattern can appear on either the upper or lower Bollinger bands.
If and engulfing pattern appears on the upper band, we trade short.
The pattern is called a
short engulfing pattern.
If and engulfing pattern appears on the lower band, we trade long.
The pattern is called a
long engulfing pattern.
Hope this helps.