Bullish and Bearish Engulfing Patterns

The Engulfing Patterns are known as Tsutsumi in Japanese. The Engulfing Patterns are one of the most important patterns that can be often noted in candlestick charts. The Engulfing patterns can be a warning signal. It indicates the buyer and seller sentiments or what they have in their mind. We normally see a change in trend after the formation of engulfing patterns. There are two kinds of engulfing patterns, one is the Bullish Engulfing and the other is Bearish Engulfing. 

BULLISH ENGULFING

The very common occurrence of this Bullish Engulfing pattern could be observed in a downtrend. When the price opens below the previous day’s closing price and closes above the opening price of the previous day, we observe a white candle forming. This white covers the entire black candle pattern of the previous day. The length of the white body will be larger than the black body of the previous day’s black body. The shadow part of the white candle does not play any major role in the assessment of this pattern. For a chart reader this pattern is known as Bullish Engulfing pattern. This pattern is considered a reversal pattern, which means a change of trend is on the way. If the body of the previous day’s candle is very smaller than the body of the engulfing pattern, then the reversal could be termed a very strong.

BEARISH ENGULFING

The Bearish Engulfing Pattern normally forms in an uptrend market. When the price opens higher than the previous day’s closing price and closes below the previous day’s opening price, we observe a candle with black body totally covering the body of the previous day’s candles body. In this pattern, too the shadows are not taken into consideration. This pattern signals a reversal in the making. When the body of the previous day’s body is smaller the significance of the Bearish Engulfing pattern increases. In a strong uptrend, this formation also signals profit booking taking place. 

The bullish and bearish engulfing patterns are too good to be ignored and a chart reader should be aware of this in order to identify trading opportunities.