Wednesday, August 5th, 2009
Bears Engulf Market
According to stockcharts.com predefined scan tool, 61 and 108 stocks on the Nasdaq and NYSE respectively printed Bearish Engulfing candlesticks today.
What is a bearish engulfing candlestick, when is it important, and why is it important?
- What is it: It is a price formation that requires the current open to be higher than the previous day’s close and the current close to be lower than the previous day’s open. It also requires that the open on the previous day be higher than the previous day’s close.
- When is it important: Only after a clearly visible upward sloping trend in prices.
- Why is it important: It is illustrative of selling pressure overwhelming buying pressure. Market participants reject or rethink the conclusion of the price discovery process of the previous day and send prices below where the previous day’s buyers opened the market.
Top pane is the Nasdaq 100, bottom pane is the Nasdaq Composite; both, along with 169 securities, printed bearish engulfing candlesticks on August 5th, 2009.
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