WHAT IS BULLISH ENGULFING?

 

DEFINITION:-

             *The Bullish Engulfing is a two-day bullish reversal pattern. 

              *Two opposite-coloured real bodies distinguish it. In a bullish scenario, the second day’s white real body must totally engulf the first day’s black real body.  

             *The shadows are not important here.

RULES TO ENTER IN A TRADE:-

               1. A downtrend must be in progress. 

            2. The first day must be a black candle. 

            3. The second day opens with a gap below the real body of the black candle but rallies upwards to close above the real body of the black candle. In other words, the second day’s real body completely engulfs the first day’s real body.

            4. The shadows are unimportant, but the colour of the second day’s real body must be white. 

            5. The Japanese name for “engulfing” is tsutsumi. The equivalent pattern in Western charting is an “outside day.”

INTERPRETATION:-

              1. The Bullish Engulfing is the most bullish of all bullish reversal patterns.

             2.This is because the counterattack by the bulls on the second day completely nullifies the downward pressure exerted by the bears on the first day by virtue of a close above the first day’s open.

PROPER ACTION:-

             1.No confirmation is required for the aggressive trader. 

             2.But for the conservative trader, a bullish confirmation is suggested. 

             3.To confirm a buy, the third candle must close above the highest high of candles 1 and 2.

            4.Place sell-stop below the lowest low of candles 1 and 2. 

            5.Best if found at a low price area or when the market is oversold.