The accompanying chart displays a Bullish Engulfing Pattern which arose in Intel stock in March 2009.  (This coincided with the Low early in that month which marked the beginning of the Great Rally which persisted into 2011).  The pattern is outlined in red at the bottom of the chart.  The “Real Body” of the tall white Candle completely engulfed the “Real Bodies” of the three Candlestick price bars which preceded it.

Note that prices rose from a Low of $12.05 in February 2009 to a High of $25.78 in December 2011.  The bullish implications of the pattern obviously bore fruit.

The Bullish Engulfing Pattern is just one of a short series of Candlestick Reversal Warning Patterns which are usually successful in anticipating significant reversals of trend.  They are equally effective in all time frames in all financial markets – Indexes, individual stocks, bonds, commodities, and Forex.

William Kurtz

http://www.CandlesticksOnSteroids.com

This particular “Inverted Hammer” offers us a special treat, in that the Open and the Close on that day were very nearly the same, namely: the Open was at $35.34, while the Close was at $35.35.  This circumstance qualifies this “Inverted Hammer” as a “Doji Inverted Hammer,” because in a Doji the Open and the Close are the same, or very nearly so.

We look for confirmation of the bullishness of the “Inverted Hammer” in the form of a higher Close on the next trading day.  The chart clearly indicates that there was indeed a higher Close on the next trading day (as shown by the price bar enclosed in blue).

The bullish implications of this “Inverted Hammer” were fully borne out by the price rise of more than $5.00 per share between November 25 and January 3.

The second Candlestick Reversal Warning Pattern which is shown on the chart is the “Bearish Engulfing” pattern, which arose on January 3, 2012 when the “Real Body” of the tall black Candle (signifying a Down day) “engulfed” the “Real Bodies” of the preceding four Candles.  This pattern is enclosed in red at the top of the chart.  We can see that prices already have started Down.

William Kurtz

http://www.CandlesticksOnSteroids.com

At that point, another Candlestick reversal warning pattern emerged – the “High-Wave Spinning Top.”  True to form, this pattern ignited prices into a four-week positive countertrend run.  Prices then reversed, downward into the Thanksgiving Week Low, and have moved upward again in a succession of finishing waves, which will mark the end of the rally which began on October 4.

As of this writing, the Russell 2000 has retraced only about 54% of the decline from its May 2011 top.  This is a weak performance when compared with that of the Dow Industrials Index, which has retraced more than 75% of the same decline.  This tells us that it probably is the deep-pocket institutional investors which have been concentrating on the prime large-capitalization stocks, while the “retail” investor, who typically fancies lesser-capitalized issues, has been less-convinced of the staying power of the rally from October 4.

We have yet to see whether the top end of that rally will be marked by another Candlestick Reversal Warning Pattern, or on the other hand whether it will dissolve rather quietly.

William Kurtz

http://www.CandlesticksOnSteroids.com

The “Morning Star” is one of the most reliable Candlestick Reversal Warning Patterns.  In this case, we can readily see that its promise was fulfilled.  Measuring from the top of the tall white Candle, prices have advanced 3.75 points (almost 5%) from October 31, 2011 to January 2, 2012.

It appears that rumors of “the death of the Dollar” were premature.

William Kurtz

http://www.CandlesticksOnSteroids.com

An excellent example of a very large Bearish Engulfing Pattern emerged in Virgin Media shares in October 2011.  The accompanying Daily chart of Virgin Media shows that the Real Body (the price distance between the Open and the Close) of the tall black candle engulfed the Real Bodies of the nine price bars which preceded it.

The proof of the pudding of this particular Candlestick Bearish Reversal Warning Pattern is the decline in the price of Virgin Media shares from the $28.14 High of October 26 to the $20.74 Low of December 12.

William Kurtz

http://www.CandlesticksOnSteroids.com

December 27, 2011

At the top end of a long advance in the Index, a tall black candle formed on May 4, 2010.  This was a strong “Down” day in the Index.  Its “Real Body” (that is, the price distance between the Open and the Close on that day) engulfed the “Real Bodies” of the thirteen price bars which preceded it.

The “Flash Crash” followed the black candle only two days later, on May 6.

The trend-reversal predictive capacity of the Candlestick Bearish Engulfing Trend Reversal Warning Pattern is quite compellingly demonstrated by this example.

William Kurtz

http://www.CandlesticksOnSteroids.com

December 14, 2011

The attached Daily chart of the NYSE Composite Index displays a fine example of the Evening Star.

We can see that this Evening Star Reversal Warning Pattern lived up to its billing.  Prices did indeed reverse to the downside following the appearance of the Evening Star, having traveled from 7864.50 at the top of the white candle on October 27, 2011 to a Low of 6898.15 at the bottom of the “Inverse Hammer” pattern on November 25.

In turn, the bullish intimation of the Candlestick “Inverse Hammer” Reversal Warning Pattern was fulfilled by a higher Closing the next day, which has been followed by a smart advance in prices.

William Kurtz

http://www.CandlesticksOnSteroids.com

December 20, 2011

The attached Daily chart of the Dollar Index displays a good example of the Morning Star.

We can see that this Candlestick Morning Star Reversal Warning Pattern has lived up to its advance billing: prices have indeed reversed to the upside, and have risen from 74.72 at the bottom of the tall black candle on October 27, 2011 to the High of 80.13 as of this writing.

William Kurtz

http://www.CandlesticksOnSteroids.com

December 15, 2011