Bullish Engulfing Pattern: Definition, Example, and What It Means

The bullish engulfing pattern is a technical indicator that is used to identify potential reversals in a downtrend. It is formed when a large, white candle engulfs a smaller, black candle. The white candle should open below the close of the previous day's candle and close above its high. The black candle should open above the close of the previous day's candle and close below its open.

The bullish engulfing pattern is considered a bullish reversal pattern because it shows that there is a shift in momentum from sellers to buyers. The large, white candle indicates that there was a strong buying surge at the end of the day, which was enough to overcome the selling pressure that had been present in the previous days.

The bullish engulfing pattern is not always a reliable indicator of a trend reversal. It is important to consider other factors, such as the overall trend, the strength of the candles, and the volume, before making a trading decision.

Here is an example of a bullish engulfing pattern:

[Image of a bullish engulfing pattern]

In this example, the market is in a downtrend. The first candle is black, and it opens above the close of the previous day's candle. The candle closes below its open, which indicates that there was selling pressure at the end of the day. The second candle is white, and it opens below the close of the previous day's candle. The candle closes above its high, which indicates that there was a strong buying surge at the end of the day. The white candle engulfs the black candle, which is a bullish reversal pattern.

The bullish engulfing pattern is a sign that the downtrend may be coming to an end. However, it is important to remember that it is not always a reliable indicator of a trend reversal. It is important to consider other factors, such as the overall trend, the strength of the candles, and the volume, before making a trading decision.