Bullish Engulfing Pattern

Bullish Engulfing Pattern:The Bullish Engulfing Pattern is a bullish reversal pattern.It happens at the bottoms of a downtrend.The pattern consists of two candlesticks:

.Smaller Bearish Candle(Day 1)

.Larger Bullish Candle(DAY 2) )

The Bearish Candle real body of Day 1 is usually contained within the real body of the bullish candle of   Day 2.On Day 2,the price at the beginning gaps down,however,the bears do not get far before bulls taken control and push prices higher,filling in the gaps down  from the market beginning (open) and pushing prices past the previous day’s open.

The power of the Bullish Engulfing Pattern comes from the notable change of sentiment from a bearish gap down in the beginning, to a large bullish real body candle that closes at the highs of the day. Bears have overstayed their welcome and Bulls have taken control the market.

The chart below of the Yes Bank shows an example of a Bullish Engulfing Pattern occurs at the end of a downtrend.  

 

Bullish Engulfing Buy Signal

There are three methods to buy using Bullish Engulfing Pattern.The buy signals that are given below are ordered from the most aggressive to most conservative.

1.Buy at the close Day 2 when prices prices rallied upwards from the gap down in the open.A strong indication that the rally on Day 2 was significant and truly a reversal of market sentiment if there was a increase in volume that accompanied the large move upward in price.

2.Buy on the Day after Bullish Engulfing Pattern occurs, by waiting until the next day is continuing and was not just one day  happening like short covering rally.In the YES Bank chart above,A trader would likely to enter the market long(buy) on the day after Bullish Engulfing Pattern because buying continued.(next candle green one or white one)

3.After a trader sees the Bullish Engulfing Pattern,the trader would wait for another technical signal,mainly a price Break above the downward resistance line before entering a long (buy order)in the market.In  the YES BANK  chart above ,the downward resistance line after the Bullish Engulfing Pattern Day.

The Bullish Engulfing Pattern is one of the strongest Candlestick Pattern.Its opposite one is the the Bearish Engulfing Pattern.