Tutorial on Bullish Engulfing Candlestick Pattern

What is Bullish Engulfing Pattern?

Bullish Engulfing Candlestick Pattern generally forms at the bottom of a downtrend , during a decline or near a potential support. Basically it is made up of two candlestick or can say it takes 2 day for the pattern to formed.
1. Day 1 (Smaller Bearish Candlestick): On Day 1, a bearish candlestick (Open price is higher than the close price) is formed shown as red candlestick in the Figure.
2. Day 2 (Larger Bullish Candlestick): On Day 2, a bullish candlestick(open price lower than the close price) is formed which completely covers or engulfs the body of bearish candlestick formed on Day 1, shown as green candlestick in the below Figure.

The name of this pattern is derived from the same fact that, Day 2 candlestick completely engulfs the Day 1 Candlestick.

For this pattern to be formed it is extremely important:
a. The open price of the Day 2 candlestick is lower than the close price of Day 1 candlestick.
b. The close price of the Day 2 candlestick is higher than the open price of Day 1 candlestick.
Bullish Engulfing Candlestick Pattern is a very common trend reversal pattern. Though it is not easy to pick this pattern but if done correctly one one can easily catch the trend reversal/buying Signal, and its highly rewarding.

The strength of this pattern is increased by the size of the engulfing candlestick. The bigger the engulfing candlestick the more significant is the pattern. The first day the small bearish candle may looks like a continuation of downtrend but its small size irrespective of wicks may show that the bearish signal is weakening. This is confirmed by the long bullish candlestick formed the next day. The larger candlestick tells a lot more about the market sentiments that the bull is taking over the bear.

On combining this pattern with any other technical indicators like Volume, Stochastic, RSI, MACD etc., further confirms this pattern and one can quickly pick up the trend change or the buy signal. For example evidence of higher volume on the third day further strengthen this pattern reliability. Similarly a price gap up the next day (Day 3) support further, this pattern of trend reversal .

Corresponding Patterns of Bullish Engulfing is as follows:
1. Bearish Engulfing
2. Three Outside Up

Now we have learn what Bullish Engulfing candlestick is, its time to see them in real life. Our website provides free stock screening based on Bullish Engulfing Candlestick Pattern.

Example of Bullish Engulfing Candlestick Pattern: Axis Bank Ltd

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Now we have learnt what Bullish candle stick is, its time to see them in real life. Our website provides free stock screening based on Bullish Engulfing . It can be found at below links:

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