Revisiting the checklist
Let’s review the checklist from a volume standpoint and consider this hypothetical technical scenario in terms of stock.
When you take into consideration the backing around the bottom and there being high volumes on the second day of a bullish engulfing pattern, i.e. P2 (blue candle), it is possible to draw some conclusions.
It is unmistakable that the large market players are trying to buy the stock, evidenced by the significant activity and rising prices.
By looking at candlesticks, support and resistance levels, as well as trading volume, it is evident that all indications point toward taking a long position. This trifecta of signals makes this decision highly likely to be successful.
The fact that volumes are compelling is one that should not be overlooked; it provides the trader with confirmation of trade and thus plays an essential role in any checklist.
This checklist has been revised, and here’s what it looks like.