Bullish Engulfing
A bullish engulfing pattern is a two-candle reversal pattern where a large green candle completely engulfs the previous red candle's body. It signals strong buying pressure and potential trend reversal at the bottom of downtrends.
Formation
- 1.First candle is bearish (red)
- 2.Second candle is bullish (green) and larger
- 3.Second candle's body completely engulfs the first candle's body
- 4.Wicks don't need to be engulfed, only the body
Psychology
The pattern shows a dramatic shift in sentiment. Bears were in control during the first candle, but bulls overwhelmed them in the second session, completely erasing the bearish move and pushing higher.
Trading Tips
- ✓More significant with larger second candle
- ✓Best after an extended downtrend
- ✓Enter on close of engulfing candle or next candle open
- ✓Stop-loss below the engulfing candle's low
Confirmation Signals
- →High volume on the engulfing candle
- →Following candle continues higher
- →Located at support level
- →Engulfing candle closes near its high
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Common questions about this pattern
It's a two-candle reversal pattern where a large bullish candle completely covers the previous bearish candle's body. It signals strong buying pressure overpowering sellers.
It's one of the most reliable candlestick patterns, especially when it forms after a clear downtrend at a support level with strong volume. The larger the engulfing candle, the more significant the signal.
While engulfing patterns are reliable, waiting for the next candle to hold above the engulfing candle's midpoint adds confidence. Aggressive traders may enter on the close of the engulfing candle.