SPY Bearish Engulfing Candlestick | Trading Recap Video

Day traders rejoice. This is our type of stock market.

Volatile. Easy to read. Go home flat. Wake up to another gap?

The amount of “we have found a stock market bottom” posts I read this morning was mind numbing. There simply wasn’t a solid argument for it.

To be honest this morning’s game plan was  tough read with the gap higher. Virtually every trading blog or group was asking the same question.

Why are the stock futures this much higher? Yes. I know. There was news but yesterday we completely reversed a lower close into a 3 day weekend. Did that much really change for a second day of buying?

Watch today’s video to see how we planned for the day and leave your comments below.

SPY Bearish Engulfing Candlestick | Trading Recap Video September 9, 2015

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Bearish Engulfing Candlestick

spy bearishThe bearish engulfing pattern consists of two candlesticks: the first is white and the second black.

The size of the white candlestick is not that important, but should not be a doji, which would be relatively easy to engulf. The second should be a long black candlestick. The bigger it is, the more bearish the reversal. The black body must totally engulf the body of the first white candlestick. Ideally, the black body should engulf the shadows as well, but this is not a requirement.

Shadows are permitted, but they are usually small or nonexistent on both candlesticks.

After an advance, the second black candlestick begins to form when residual buying pressure causes the security to open above the previous close. However, sellers step in after this opening gap up and begin to drive prices down. By the end of the session, selling becomes so intense that prices move below the previous open.

The resulting candlestick engulfs the previous day’s body and creates a potential short-term reversal. Further weakness is required for bearish confirmation of this reversal pattern.

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