Bullish Engulfing

 

A Bullish Engulfing pattern is a powerful candlestick pattern that signals a potential reversal from a downtrend to an uptrend.

And it is formed at the bottom of the trend  characteristics:

1. Two-Candle Formation – It consists of two consecutive candlesticks:

• The first candle is a small bearish (red/black) candle.

• The second candle is a large bullish (green/white) candle that completely engulfs the first candle’s body.

2. Appears in a Downtrend – It usually forms after a series of bearish candles, indicating a possible trend reversal.

3. Strong Bullish Sentiment – The second candle opens lower than the previous close but closes significantly higher, showing buyers taking control.

4. High Volume Confirmation – If the bullish engulfing candle is accompanied by high trading volume, it adds strength to the reversal signal.

5. Closes Above the Previous Candle’s Open – A strong bullish engulfing pattern completely covers the previous candle’s body (excluding wicks/shadows), signaling strong buyer momentum.

How to Trade a Bullish Engulfing?

• Entry: After confirmation (next candle breaking the engulfing candle’s high).

• Stop-Loss: Below the low of the engulfing pattern.

• Target: Previous resistance levels or based on risk-reward ratio.