BULLISH ENGULFING PATTERN
Back to GlossaryDefinition
A bullish reversal candlestick where a large up candle engulfs the prior down candle.
Summary
A Bullish Engulfing Pattern is a two-candlestick formation that signals a potential upward price reversal in technical analysis. It occurs when a small bearish (red/down) candle is completely 'engulfed' or covered by a larger bullish (green/up) candle that follows it. The second candle's body must open below the first candle's close and close above the first candle's open, creating a visual pattern where the larger candle wraps around the smaller one. This pattern suggests that buying pressure has overwhelmed selling pressure, potentially indicating a shift from bearish to bullish sentiment.
Usage Context
This term is crucial when studying technical analysis and candlestick chart patterns, particularly in modules covering reversal signals, entry and exit strategies, and risk management in trading decisions.
Common Confusions
- Thinking any larger green candle after a red candle counts as engulfing
- Ignoring the requirement that the second candle must completely engulf the first candle's body
- Confusing it with other reversal patterns like hammers or shooting stars
- Assuming the pattern guarantees a reversal rather than just suggesting potential
- Not considering the overall trend context when interpreting the pattern
