Bullish Engulfing Pattern

A Bullish Engulfing Pattern is a reversal pattern consisting of two candlesticks. It occurs when a small black candlestick is succeeded by a large white candlestick the following day, with the body of the white candlestick completely covering or engulfing the body of the previous day's black candlestick. The term "engulf" refers to the act of sweeping over, surrounding, or completely covering something.

This pattern features one candlestick that engulfs another. It typically appears after a downtrend and is made up of one bearish candlestick (the one being engulfed) and one bullish candlestick (the one doing the engulfing).

To identify the Bullish Engulfing Pattern, look for these key criteria:

• An evident downtrend must be in place.
• A small black candle should be present at the bottom of the downtrend.
• A white candle must follow the black candle, with its body completely covering the black candle (engulfing it).
• The top of the white candle must be above the top of the black candle, and the bottom must be below the bottom of the black candle.

Meaning

Since the Bullish Engulfing pattern appears during a downtrend, it indicates that the bears were previously in control. Although there is a gap down, the bears fail to push the price down significantly before the bulls take over. The price then rises, and the candle closes higher than the opening price of the previous candle. This shift in sentiment is evident, moving from a gap down in the morning to a strong upward movement during the session, resulting in a large bullish candle. This suggests that the bulls are gaining control and a reversal may be on the horizon, although confirmation is still necessary.

To further analyze a specific Bullish Engulfing pattern, consider the following:

• If the preceding downtrend is long and significant, the reversal pattern is likely to be more effective.
• The taller the body of the white candle, the stronger the candlestick pattern is.