Bullish Engulfing Pattern
The Bullish Engulfing Pattern is a candlestick pattern that signals an impending reversal to the upside in a stock‘s price movement. This pattern occurs during a downtrend and consists of two candlesticks.
How to Identify
The pattern is characterized by a small bearish candlestick followed by a larger bullish candlestick that completely engulfs the body of the previous candle. The second candle should open below the close of the first candle and close above the open of the first candle.
Interpretation
Traders interpret the Bullish Engulfing Pattern as a strong signal that the selling pressure has been exhausted and buyers are stepping in to drive the price higher. The pattern suggests a shift in sentiment from bearish to bullish and indicates a potential uptrend reversal.
Trading Strategies
Traders often use the Bullish Engulfing Pattern as a buy signal, entering long positions when the pattern forms. They may place a stop-loss order below the low of the engulfing candlestick to manage risk. Some traders also look for confirmation from other technical indicators or chart patterns before entering a trade based on the Bullish Engulfing Pattern.
