BULLISH ENGULFING PATTERN / BEARISH ENGULFING PATTERN

Bullish Engulfing chart pattern – Buy signal

A Bullish Engulfing pattern consists of two candlesticks: a bearish candlestick (red) with a small body followed by a bullish candlestick (green) with a larger body. The body of the bullish candlestick engulfs the body of the bearish candlestick.

 
Bullish Engulfing pattern. Number of candles 2
Price trend The pattern should appear in a downtrend. It indicates the potential start of a bullish trend.
First candle A bearish candle.
Second candle A bullish candle. The body engulfs the body of the bearish candle.

 

Bearish Engulfing chart pattern – Short sell signal

A Bearish Engulfing pattern consists of two candlesticks: a bullish candlestick (green) with a small body followed by a bearish candlestick (red) with a larger body. The body of the bearish candlestick engulfs the body of the bullish candlestick.

     
Bearish Engulfing pattern. Number of candles 2
Price trend The pattern should appear in an uptrend. It indicates the potential start of a bearish trend.
First candle A bullish candle.
Second candle A bearish candle. The body engulfs the body of the bullish candle.

 

In the trading platform

For these two chart patterns to be valid they must appear during a downtrend or an uptrend. The pattern detector in the NanoTrader contains a trend indicator based on the Zigzag. Nevertheless, by adding a trend indicator of your choice, you can see the trend directly in the chart. Now you know which patterns are valid trading signals.

This example shows three Bullish Engulfing patterns but are they all valid buy signals? It depends on the trend. The NanoTrader platform offers an easy solution: insert one or more trend indicators.

Bullish Engulfing pattern gives free trading signals.  

Are these three Bullish Engulfing patterns valid buy signals? In order to be valid buy signals the patterns must occur in a downtrend.

By adding the popular SuperTrend indicator, for example, you can see if the market is in an uptrend (green chart background) or a downtrend (red chart background).

Bullish Engulfing pattern filtered by SuperTrend indicator.  

Two of the patterns occur in a downtrend. These two patterns meet the criteria for a valid buy signal.