Bullish Engulfing Pattern Explained

From a previous article entitled : Thor's Hammer in Candlestick Chart , I modestly attempted to impart some knowledge and observation regarding a particular bullish pattern that can be seen when looking at a candlestick chart for a cryptocurrency. This time, I will be adding another bullish pattern to my arsenal and I will try to offer you everything that I know and have read about it.

Currently, looking at the trend of our beloved BCH it seems to be going down down and down. I imagine that many of our friends and colleagues now in crypto world will soon collect some earnings. And who knows maybe I will soon see some of the bullish patterns I recognize and I may be able to play my cards right. Maybe that turning pattern will be a bullish engulfing pattern.

Bullish Engulfing Pattern

A bullish engulfing pattern is often seen in a downtrend and is consisted of two candles. It is a two-candle pattern in which takes into consideration 2 days in stock market trading and two time frames in cryptocurrency. The pattern looks like the image below.

Focusing on the the two candles in the middle, that will be a bullish engulfing pattern. The "real body" of the second candle of the set totally engulfed or swallowed the whole "real body" of the previous candle, disregarding each others' wicks. It is a bullish engulfing pattern when the first candle is a bearish candle and the next candle is a bullish one.

Usually, when it comes to trading in the stock market, the opening of the second candle is lower than the closing of the previous candle. This is possible because the stock market closes every end of business hours and it opens on the next business day. It is possible to place "orders" of selling even when the market is closed, thus affecting also the pattern that will put a bit of a gap when the stock market opens the next day. This gap will not be seen in a candlestick chart of a cryptocurrency because the trading for cryptocurrencies run for 24 hours a day and 7 days a week, so all transaction, buy and sell are valid and are transacted timely.

What Does the Pattern Mean

Seeing this pattern on a downtrend may mean that a price reversal is incoming. It may indicate that the buyers of the asset entered the trading arena and are winning against the sellers which is evident in the price increase.

Experienced traders wait for a confirmation before they make their move and enter a "long position" when they see this pattern. When the next candle after the second candle of this pattern has higher high value than the second candle's high value, then the bullish engulfing patterned is confirmed. Traders may now start holding, or even buy some more to hodl because the price prediction that this pattern entails is that the price of the asset is going up, up and up.

So far, I find that this candlestick pattern is the easiest one to identify. If you look at a past chart that this pattern is present, you can easily pinpoint that it is indeed an engulfing pattern. It is visually noticeable since the second engulfing candle really stretches itself and stands out like a sore thumb.

They also said that it is really important to observe the placing of this pattern for it to be valid, when it appears during a bullish run or an uptrend, it may not be a valid bullish engulfing and may even indicate that a downtrend price reversal is just a heartbeat away.

Conclusion

A bullish engulfing pattern has the following factors as key indicators

• 2-candle pattern, 1st candle bearish, 2nd bullish

• must appear at a downtrend

• 1st candle's body length shall fit within the 2nd candle's body (excluding the wicks)

• confirmed if the next candle's high is higher than the second candle's high

Hey there!!!

It is really nice to see you again on my page. I have to apologize that this one seems to be rather late, but as they say, better late than never. And it also worked for the best right? With the current downtrend, we may be lucky enough to see a bullish engulfing pattern and we will ride again to the moon.

Anyway, thank you for reading this one and as always,

cheers!!!

References:

Richard Snow 2019, Trading the Bullish Engulfing Candle, Daily FX, accessed 17 May 2021, <https://www.dailyfx.com/education/candlestick-patterns/bullish-engulfing.html>

Scott Melker 2019, 5 Bullish Candlestick Patterns Every Bitcoin, Crypto Trader Must Know, Cointelegraph, accessed 17 May 2021, <https://cointelegraph.com/news/5-bullish-candlestick-patterns-every-bitcoin-crypto-trader-must-know>

Lead image : https://www.olymptradewiki.com/bullish-engulfing-pattern/