The Bullish Engulfing is one of the most powerful reversal signals. It indicates the exhaustion of a downtrend phase and the beginning of a new positive trend.
The bullish engulfing candle is best defined as coming at the end of a long downtrend in the market.
How to identify the Bullish Engulfing pattern
The candlestick reversal starts with the market OPEN below the previous CLOSE (with a gap lower). The price then starts to move higher early in the session (the OPEN is at, or around, the session LOW), and rallies strongly throughout the session.
The CLOSE price of the Bullish Engulfing is above the OPEN of the previous candle. The whole of the previous session’s candlestick body is said to have been ”engulfed”.
With the CLOSE of the Bullish Engulfing candle coming at or near to the HIGH of the session, this reflects a change to a more positive market outlook. The price can then build on this and continue to trade higher during the next candle.
Note: Although the Bullish Engulfing is just one candlestick, it is measured off the previous candle. So strictly speaking, it is a two-period candlestick set-up.
Using Bullish Engulfing signals
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