Mastering Candlesticks: Bullish Engulfing

What is it?

The Bullish Engulfing candlestick pattern takes place over two time periods, and it must be located at the end of a downward trend. The first candlestick of the pattern must be black or red and followed by a second candlestick, white or green in color. The second candle will always gap down at the opening of the period, and then it will trade up to close the period out above the first candle’s real body thus the term “engulfing”. As with the Bullish Piercing candlestick pattern, the larger the two candlesticks are, the more substantial the reversal action will be. However, it should be noted that the size or presence of shadows or wicks on this pattern does little to influence the overall outcome.

What Should I Do When I See This Pattern?

The Bullish Engulfing candlestick pattern is a bullish reversal pattern when found at the bottom of a downswing. We must stress the location of the pattern being at the end of a downswing is of utmost importance. Since this pattern is a solid bullish reversal signal, now would be an excellent time to consider buying shares of the company in question for a long trade and setting the appropriate stops on your trade. As always, you should confirm that the price action of the next candle has moved higher before entering a long trade.