This pattern shows that the Bulls, or Buyers, are seizing control. It signals a potentially strong reversal of the trend and a BUY opportunity.
Bullish Engulfing Pattern
This candlestick pattern, or signal, appears at the bottoms of large moves- often following panic selling. It often is seen at the end of Elliott Wave Patterns. It illustrates that the buyers are taking back the control. If the buyers (Bulls) continue to hold that control they will take the price higher- which is what happened in this case.
The blue bullish engulfing candle would be valid if it only engulfed, or overshadowed, the previous candle. However, it engulfed the previous 7 candles. This makes it a potentially more powerful signal.
Candlesticks tell us a lot about the sentiments, or feelings, of the traders:
1. This is the Bullish Engulfing candle. It opens at or below where the previous candle closed. It represents a change in the trader’s sentiment and shows that the Bulls (Buyers) are stepping in and starting to win the battle. To be valid it must engulf the trading range of the preceding candle. However, it is even more valid when it engulfs more than one candle. In this case, it overshadows the trading ranges of the preceding 7 candles.
2. This Doji represents indecision of the traders. It too is a candle reversal signal.
3. Another Doji.
4. This candle shows that the Bears (Sellers) struggled to take the price lower but were unable to keep it there.
5. This Spinning Top also shows indecision. The bulls and the Bears are battling it out yet neither is clearly winning.
It should also be noted that the bullish engulfing candle, with the previous two candles, make up a Morning Star formation.
It should be noted that the Bearish Engulfing pattern works the same way except it appears at the top. Her is an example:
NOTE: The candle colors are chosen by selecting preferences in your charting platform and selecting your colors. My preference is blue for bullish (moving up) candles and red for bearish (moving down) candles.
Jump-Start your Learning Curve
Traders can greatly improve their technical analysis and their trading success by understanding candlestick patterns. There is much information on the Internet to learn from. However, if you really want to jump-start your learning curve check out the man who introduced Candlestick Signals to the Western world. Discover how he can help you to Master Candlestick Reversal Signals.
This pattern shows that the Bulls, or Buyers, are seizing control. It signals a potentially strong reversal of the trend. This signal indicates a potential BUY opportunity. Any candlestick signals should not be used in isolation but with technical analysis and other technical indicators. These signals, or patterns, are but one powerful tool in our trading arsenal.
This FREE Video will discuss how candlestick signals can help you pinpoint reversals.
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