The bullish engulfing pattern (picture 1) is significat contains of two candlesticks; the first is black, and the second is a white candle that completely “engulfs” the first candle.
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| engulfing pattern |
The size and positioning of the white candlestick can vary greatly, but the critical feature of the pattern is that the second candle should be long and its body should completely encompass the wicks or shadows as well as the body of the smaller candle. The bigger the candle, the more bullish the signal. The bearish engulfing pattern works the exact same way except in reverse. Picture 2 and 3 show both bullish and bearish engulfing patterns.
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| bullish engulfing pattern |
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| bearish engulfing pattern |
In other words a bullish engulfing pattern is formed when, during a downtred whitereal body wraps around a black real body. A bearish engulfing pattern is completed when, during a rally, a black real body envelops a white real body. The engulfing pattern visually exhibits how the opposing forces had acquired control of the market. A bullish engulfing pattern reflects how the bulls have wrested control of the market from the bears. A bearish engulfing pattern shows how a superior force of supply has over whelmed the bulls.The bullish or bearish engulfing candlestick formation also if is considered by some to be a reversal pattern, but is in fact a good signal of a potential breakout or breakdown. “ The importance of the engulfing pattern is dependent on the relative size of the real bodies, the relationship of the shadows to one another, and other factors. For example, the strictest definition of an engulfing pattern would be if the first candle is small and
the second candle very large, and the second real body wraps around the entire first candleincluding its shadows. The next strictest definition would be if the shadows of the second candle exceeded the shadows of the first candle (in other words, on the second day of the engulfing pattern, the market made a higher high and a lower low). Steve Nison- Beyond Candlesticks”
Engulfing pattern Quiz
Breakout Candlestick Pattern: Engulfing pattern
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