Engulfing Candlestick Pattern Means A Trend Reversal In The Market!

Trend trading is what makes a fortune. If you can master the art of predicting potential trend reversals, you can make a fortune trading any market. And when it comes to predicting trend reversals, Engulfing Candlestick Pattern is one of the most popular candlestick trend reversal patterns!

This is a two stick pattern and it takes two days for the pattern to develop. The pattern's name comes from the fact that the signal day completely engulfs the setup day. So the candle body and the wick on the signal day engulfs the candle body and wick on the setup day.

Bullish Engulfing Pattern has a bearish candle on the first day. The second day, the bulls enter the market with such a force that they surpass both the open and the high of the first day. While in case of a Bearish Engulfing Pattern, the first day is a bullish candle that is engulfed by a bearish candle on the second day meaning the bears have taken over the market.

The bigger the second day candle, the more powerful the trend reversal signal. If it is a very big bullish candle, it means bulls are in total control and if it is a big bearish candle, it means the bears are now in full control.

You need to confirm this trend reversal signal with another indicator like the CCI. This will make sure that any false signal is filtered out before you actually trade it.

So, in case of a bullish engulfing pattern, on day one bears dominate the market. The open is near the high. Bears push down the prices all day until the close ends up near the low. On day two, the bears again push down the prices a little bit at the start of trading before the bulls come into action and start pushing the prices up never stopping. The bulls exceed the prices of the previous day and even push the prices up over where the trading started the previous day.

When it is a bullish engulfing pattern, it means the bulls are going to control the market for the coming days. Similarly when it is a bearish engulfing pattern, it means the bears will control the market for the days to come.

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