Bullish Engulfing |
Characteristic of Candlesticks: Reversal
Relevance of Candlesticks: Bullish
Prior Trend of Candlesticks: Bearish
Reliability of Candlesticks : 1st Grade
Confirmation of Candlesticks: Highly Reliable
Candlestick Patterns Key Reference |
DESCRIPTION
Bullish Engulfing pattern is a white body of the bullish candlestick engulfing the previous smaller bearish candlestick's body.
The second bullish candlestick is not necessarily to engulf the shadows of the bearish candlestick but to engulf the entire body of the previous small bearish candlestick.
Bullish Engulfing is an bottom reversal pattern which is highly reliable for sharply reversing a downtrend to an uptrend.
PATTERN RECOGNITION
1. Bullish Engulfing pattern can be identified by a downtrend followed by a bottom reversal.
2. Refering to above diagram, firstly we will see a small bearish candlestick at the bottom of the downtrend.
3. Finally we will see a bullish candlestick which engulf the first bearish candlestick entire body.
EXPLAINATION
When Bullish Engulfing pattern is formed at the bottom of a downtrend with a gap followed by a reversal is extremely powerful indication of a change in sentiment.
The second candlestick indicate bull strength with a closing price at or above the previous candlestick open price. That shows that the the bull is in control and the bear is losing its strength.
The 1st grade reversal patterns are the most reliable group of reversal patterns that seldom require any confirmation.
POINT TO NOTE
The size of the body is important on the first and second candlesticks. The Bullish Engulfing pattern is identified by a small bearish real body (can be even a doji or doji with small body) on the first candlestick.
The second candlestick is identified by a long bullish real body which indicates that the bear lost its command and bull is now in control.
The longer the body of the second candlestick indicate the stronger change in sentiment. That means the second candlestick of the Bullish Engulfing pattern will engulfs the past two or more small bearish candlesticks.
The downtrend reversal confirmation is required on the third candlestick. The confirmation is needed in a form of a bullish candlestick with a large gap upward or a higher close on the third candlestick.
CANDLESTICK PATTERNS KEY REFERENCE
Irrespective of Color (Can be bullish or bearish) |
Uptrend |
Consolidation |
Downtrend |
ANTICIPATED DIRECTION OF TREND
Lighter Arrow = Lower Probability
Solid Arrow = Higher Probability
More Likely to go sideway, Less likely to rally
|
More likely to rally, Less likely to go sideways
|
More likely to go sideway, Less likely to fall
|
More likely to fall, Less likely to go sideways |
