Buy Signals With the RSI and Bullish Reversal Candlestick Patterns

By: rashme

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Uploaded on January 30, 2010 by rashme

http://ForexAutopilotSystem.org -

Buy Signals With the RSI and Bullish Reversal Candlestick Patterns - The Relative Strength Index (RSI) is a fairly popular indicator that can tell you whether a stock or a currency pair is overbought or oversold. RSI value ranges between 0 and 100. Values below 30 indicate that the market is oversold and above 70 means that the market is overbought. The good thing is that you can combine RSI reading with candlestick reversal patterns to further confirm that a reversal is imminent and you can take a long position. You can also use the RSI to select your exit level. Let's take an example to make it more clear. Suppose you want to trade a stock. You are using RSI indicator to determine when the market is oversold. You wait for sometime and ultimately find RSI reading to be less than 30 meaning that the market is now oversold and you can enter your trade. But a better way would be to wait for the bullish candlestick reversal pattern to appear. So you spot one, the famous Three Inside Up Candlestick Reversal Pattern. This candlestick pattern usually appears when the market is about to turn bullish after many bearish days. Now when you spot such a candlestick reversal pattern, it is a confirmation that the market is indeed oversold and is about to turn bullish. This is the right time to enter the market just at the level where the candlestick reversal pattern appeared. The beauty of this three inside up candlestick pattern lies in the fact that it takes three days for this candlestick pattern to form. When you spot the first two candles formed with the candle on the first day bearish, the candle on the second day bullish but small get anxious for the candle on the third day to be bullish and higher than the open of the first candle. This gives you plenty of time to plan your swing trade. The appearance of this candlestick reversal pattern indicates that the market is going to see an uptrend for sometime in the future. You can go long close to the level where the candlestick ...

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