Unlike the Engulfing Candlestick pattern this combination of consecutive candlesticks is found a bit more often and are considered more unreliable. Traders look for these formations as confirmations of larger trends, especially if they are around price levels already identified as support or resistances.
David demonstrates the theory behind this pattern and showcases it in real chart examples that also have different levels of success.
Its equivalent pattern, perceived as a bullish signal – the piercing pattern – is also covered in this video. It is essentially the same pattern but this time the candles are oriented upwards and the second one covers the 50% price level of the previous one.
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