New edge proposed: high_volume_engulfing_reversal — E8 Intelligence Research

Abstract

{ "name": "high_volume_engulfing_reversal", "source": "Thomas Bulkowski's Encyclopedia of Chart Patterns", "type": "entry_engine", "rule": "Enter long when a red candle is fully engulfed by a subsequent green candle whose volume is at least 1.5 times the 20-period average volume and the low of the engulfing candle is below the lower Bollinger Band; enter short for the opposite on a red engulfing candle with high volume above the upper Bollinger Band.", "pseudocode": "lookback=20; avgVol=avg(volume,lookback); if candle[i-1].close < candle[i-1].open and candle[i].close > candle[i].open and candle[i].high > candle[i-1].high and candle[i].low < candle[i-1].low and candle[i].volume >= 1.5*avgVol and candle[i-1].low < bollinger_lower[i-1] then enter_long; if opposite conditions with candle[i-1] being green and candle[i] red, high > bollinger_upper then enter_short", "why_it_works": "High-volume engulfing at Bollinger extremes indicates trapped traders and a strong momentum shift, often Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com