RSI, Three Bearish Candles, and Engulfing-Range Stock Screen

Summary

This stock-selection rule combines a 14-period RSI below 65 with three consecutive down candles and a range-contraction condition. The accompanying formulas define down candles by closes below opens. The additional price condition requires the current high and low to fall below the corresponding levels from each of the two preceding sessions. Despite being called an engulfing signal, the supplied conditions describe lower highs and lows rather than a conventional bullish engulfing candle.

The document presents the screen as a way to find stocks with weak recent technical behavior and discusses possible limitations: it omits other market sentiment and indicators, may miss attractive stocks, and the price pattern can be followed by a short-term rebound. Suggested refinements include adding sentiment, financial, volume, and other technical measures. No backtest, performance statistics, universe definition, or evidence that the screen has an investment edge is provided, so the rule should be treated as a proposed filter rather than a validated strategy.

Key ideas

• The screen requires RSI below 65 and three consecutive sessions with closes below opens.
• Its price pattern requires lower highs and lows than those of each of the two previous sessions.
• The stated conditions differ from the usual meaning of a bullish engulfing pattern.
• The author suggests adding sentiment, financial, volume, or other technical data to refine the screen.
• No backtest or performance evidence is included.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.