What Is Bullish Engulfing?
A bullish engulfing pattern is a two-candle reversal signal where a large bullish (green) candle completely engulfs the body of the previous bearish (red) candle. The second candle opens below the first candle's close and closes above its open, showing buyers have decisively overpowered sellers.
How Bullish Engulfing Works
The pattern signals the strongest reversal potential when it appears at key support levels after a downtrend, on above-average volume, and when the engulfing candle closes near its high (indicating sustained buying pressure, not just a wick). Multiple bullish engulfing patterns at similar levels create an even stronger support zone.
Why It Matters for Traders
Traders use bullish engulfing patterns as entry signals for long positions, particularly when they align with other confluence factors like horizontal support, moving average support, or oversold RSI readings. The stop-loss is typically placed below the low of the engulfing candle, creating a defined risk level with clear invalidation.
