Stock investors need good, strong signals to identify timing of entry and exit. Even conservative buy-and-hold investors have to time trades to maximize the possibility of profits.

One candlestick pattern involving two sessions helps to build confidence. Of course, as with all indicators, you have to rely on reversal indicators and confirmation. So before buying of selling shares, master the art of identifying signals and then also finding confirmation in other signals.

One of the best reversal signals is the engulfing pattern, a two-session indicator in which the direction flips; and the second day's open and close exceeds the open and close of the previous session. One study conducted by Thomas Bulkowski (Encyclopedia of Candlestick Charts) concluded that the bullish engulfing is a reliable reversal signal 62% of the time; and a bearish engulfing does the same 79% of the time.

In the bullish version of this (found at the end of a downtrend and indicating likely reversal to the upside), the first session is black (moving down); and the second session is white (moving up), but with both opening and closing price levels beyond those of the first day.

In the bearish version (found at the top of an uptrend and foreshadowing a reversal and downward move), the same pattern is found, but the initial session is white (upward-moving) and the second session is black (downward-moving).

This pattern is seen frequently on stock charts, and it is reliable as a reversal indicator most of the time. But it should never be used by itself. Remember the importance of confirmation before you act; this is an essential step in the timing of entry and exit.

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