Bullish Engulfing Pattern

The Bullish Engulfing Candlestick Pattern is a bearish reversal pattern, which usually occurs at the Bottom of a down trend and it consists of a a small bearish candlestick with a small tail followed by a reversal bullish candlestick that overshadows or “engulfs” the small bearish one. The opposite of the Bullish Engulfing pattern is the Bearish Engulfing pattern.

Smaller Bearish Candle (Day 1)

Larger Bullish Candle (Day 2)

So how does this pattern form?

Prices are in a downtrend nearing a support level, and a bearish candle forms on Day 1, which is near or on support level. On Day 2 prices gap downwards, opening lower than Day 1 close.

On Day2 the market gapped downward, but the bears failed to push prices lower, finding lost of buyers in their paths. Normally this occurs when we approach near a support level, where there are many bulls awaiting. The strength of the bulls and weakness of the short sellers pushes Day 2 to close higher than Day 1 open. In this scenario the body of Day 2 has engulfed Day 1, forming the Bullish Engulfing Pattern.

As stated above, this occurs near support levels in a downtrend, on a pivot point in a downtrend, or just given a strong change in sentiment in the markets. In fact prices go from a bearish gap down on the open, to the big blue bullish real body candle that closes higher than the previous day’s open. Bulls have successfully overpowered the bears on the day(2) and this positive sentiment is likely to continue for the next few coming days.