Bullish Engulfing



candle
Pattern reversal
Reliability moderate
 

Identification

A black day is completely “engulfed” by a large white day that gaps below the black day’s low and rallies to close above its high.

Psychology

In a downtrend or within a pullback of an uptrend, the gap down may be the blow out that causes the bulls to throw in the towel. When selling abates, bottom fishers and shorts rally the stock to close above the previous day’s high. The bullish Engulfing pattern is very common…literally dozens occur every day and many are just incidental. Watch volume for confirmation.

The bullish Engulfing is similar to the bullish Piercing Line and could be the first two days of the bullish Three Outside Up.