Formation of a Bullish Engulfing
Bullish Engulfing patterns are most commonly seen at the bottom of a downtrend or at consolidation Support levels. A small red candlestick forms the foundation, which is followed by a large green candlestick, which is flooded by the last candlestick’s body.
The Engulfing Bullish patterns indicate that the Bearish downtrend has changed. A large, green body completely obscures the previous candlestick’s highs and lows. After the market opens, buyers rush in and seize control. The rule of thumb is that the larger the engulfing, the higher the market will move. A large volume during the formation of the green Candle is a sign of an important reversal.
Formation of a Bearish Engulfing
Bearish Engulfing patterns are most common at the bottom of an uptrend or at consolidation Resistance levels. A small green candlestick forms the foundation, which is followed by a large red candlestick, which is flooded by the last candlestick’s body.
A change in the Bullish uptrend is indicated by the Bearish Engulfing pattern. A large, red body completely obscures the previous candlestick’s highs and lows. After the open, sellers enter the market and seize control. The rule of thumb is that the larger the engulfing, the lower the market will go.
A large volume during the formation of the red Candle is a vital reversal sign.
