When a security (stock, sector, index, commodity, etc..) prints a bullish or bearish engulfing candlestick “around the right time*”, I’ll usually take it on face value (as a potential bottoming or topping stick) but they are far from the holy grail of buy/sell signals.

We’ve certainly seen a decent amount (not a lot but several) BEC’s on the daily and/or weekly charts of the major stock indices in recent years, some of them marking significant tops followed by major corrections or bear markets & some that didn’t.

However, the R/R on shorting a BEC with stops not far above (bearish) or below (bullish) is nothing short of phenomenal, as if they mark a major top or bottom, the loss potential is dwarfed by the profit potential.

QQQ put in a BEC on the weekly chart back on the week ending 12/20/24 and although that didn’t mark the exact top, if someone shorted & set their stop somewhat above the top, QQQ put in another weekly BEC on 2/21/25 which did mark the start of the early 2025 26% bear market. (char below)

I got stopped out with this bounce. I should have known better as the option prices were really high for gold, so the massive bounce back was expected. Not convinced it will fall from here. I will wait to see if it breaks Randy’s T1 before trying again. It is back up above the short-term trend line.