Understanding Candlesticks_8. Bullish and Bearish Engulfing Patterns

Lesson 8: Bullish and Bearish Engulfing Patterns

One of the two candlestick bullish reversal signals is the bullish engulfing
pattern. The first of the candlesticks is a bearish one. It doesn’t need to have a large
real body but the signal is stronger if it has.

The second is a long bullish candle that completely engulfs the first candlestick’s
real body. Note that both candlesticks can have small shadows as well.

The important thing to look at is the real body. This is a very strong reversal
signal because not only does the second candlestick show the change in the market
players’ psychology, but also it has managed to close above the previous
candlestick’s opening price.

The signal gets stronger if the second candle can wrap around more than one of
the previous candles. As this is a bullish reversal signal, we will only look for it in a
down-trend.

On the other side of the trend, we can see the opposite signal which is called the
bearish engulfing pattern. The first candle in the signal is a bullish candlestick and
the other one is a long bearish one that completely wraps around the first candle.

Remember: the bullish engulfing signal is only valid in a down-trend - and the
bearish engulfing pattern only in an up-trend.