KLine Refinement Analysis Lesson 19: The Swallowing Form of Inverted Form

Actually, in the second and third lectures of the technical analysis service packageKThere has been a mention of "engulfment form" in the line combination, and this section will conduct a more in-depth analysis.

The engulfment form can be divided into two forms: upward engulfment and downward engulfment, respectively representing the "bear to bull" and "bull to bear" in the reversal form. This lecture will only analyze upward engulfment, and investors can draw inferences on their own to understand "downward engulfment".

Recognition Rule
1）Previously, the market was in a downward trend;
2）First rootKThe line is a negative line, the second oneKThe line is a positive line;
3）The second positive line entity completely engulfs the first negative line entity.

Psychological Analysis
The market itself is in a downward trend and continued to decline on the first day, closing the negative line. The market continued to decline the next day, continuing to open low and falling for a while. Later, as buying continued to pour in, the stock price gradually turned to rise, and the final closing price was actually higher than the opening price on the first day, completely compensating for the first day's decline. The bearish sentiment in the market has been greatly affected, and the bullish sentiment has been greatly encouraged. If the opening price continues to rise on the third day, it is basically certain that the downward trend will be reversed, and the upward trend is about to start.

Related Forms
There are similarities between the engulfment form and the "three external ascents" we will discuss later, but in fact, if a third root appears after the engulfment formKLine and its closing price is higher than the second lineKThe closing price of the line will evolve into a "three external rises", and the bullish trend will be further confirmed.

Practical Application

2018year10month18day500ETF（510500）Continuing the previous downward trend, the day closed at a negative line, with a decline of2.21%Opening price4.369Yuan, closing price4.297Yuan, continue to lower at the opening of the next day4.268Yuan, and once fell to4.220Yuan, then gradually rebounded until the closing price rose2.07%Closing price4.386Yuan, higher than the opening price of the previous day4.369Yuan, the trading volume rapidly increased on the same day. The next day, we continued to open high and move higher. Although there were significant fluctuations in the future, the basic trend has reversed to an upward trend.

***Risk statement***
KLine analysis is only an indicator tool used to judge the strength of buyers and sellers in the market and market sentiment. How to identify and study is subjective to some extent. It may not be correct to judge the future market. Many fundamental investors never analyzeKChoosing to hold high-quality individual stocks for a long time has also resulted in significant returns. Please evaluate for yourself whether and how to use itKLine tool.