In this post we will cover trader’s favorite two chart patterns first is Bullish engulfing pattern and second is Bearish engulfing pattern. If you know how to properly use these patterns then these are highly profitable, let take them one by one :-
The Engulfing bar as it states in its title is formed when it fully engulfs the previous candle. The engulfing bar can engulf more than one previous candle, but to be considered an engulfing bar, at least one candle must be fully consumed.
Bearish Engulfing bar chart pattern
The bearish engulfing is one of the most important candlestick patterns. This candlestick pattern consists of two bodies: The first body is smaller than the second one, in other words, the second body engulfs the previous one. See the example below:
This is how a bearish engulfing bar pattern looks like on your charts, this candlestick pattern gives us valuable information about bulls and bears in the market.
In case of a bearish engulfing bar, this pattern tells us that sellers are in control of the market. When this pattern occurs at the end of an uptrend, this indicates that buyers are engulfed by sellers which signals a trend reversal.
See the chart pattern below:
As you can see when this price action pattern occurs in an uptrend, we can anticipate a trend reversal because buyers are not still in control of the market, and sellers are trying to push the market to go down. You can’t trade any bearish candlestick pattern you find on your chart; you will need other technical tools to confirm your entries
Bullish Engulfing bar chart pattern
The bullish engulfing bar consists of two candlesticks, the first one is the small body, and the second is the engulfing candle, see the example below:
The bullish engulfing bar pattern tells us that the market is no longer under control of sellers, and buyers will take control of the market. When a bullish engulfing candle forms in the context of an uptrend, it indicates a continuation signal.
When a bullish engulfing candle forms at the end of a downtrend, the reversal is much more powerful as it represents a capitulation bottom. See the example below:
The example above shows us clearly how the market changes direction after the formation of a bullish engulfing bar pattern. The smaller body that represents the selling power was covered by the second body that represents the buying power.
The color of the bodies is not important. What’s important is that the smaller one is totally engulfed by the second candlestick. Don’t try to trade the market using this price action setup alone, because you will need other factors of confluence to decide whether the pattern is worth trading or not, i will talk about this in coming session.