The engulfing bar candlestick pattern
The Engulfing bar as it states in its title is formed when it fully engulfs
the previous candle. The engulfing bar can engulf more than one
previous candle, but to be considered an engulfing bar, at least one
candle must be fully consumed.
The bearish engulfing is one of the most important candlestick
patterns.
This candlestick pattern consists of two bodies:
The first body is smaller than the second one, in other words, the
second body engulfs the previous one. See the illustration below:
This is how a bearish engulfing bar pattern looks like on your charts,
this candlestick pattern gives us valuable information about bulls and
bears in the market.
n case of a bearish engulfing bar, this pattern tells us that sellers are
in control of the market.
When this pattern occurs at the end of an uptrend, this indicates that
buyers are engulfed by sellers which signals a trend reversal.
See the example below:
As you can see when this price action pattern occurs in an uptrend, we
can anticipate a trend reversal because buyers are not still in control
of the market, and sellers are trying to push the market to go down.
You can’t trade any bearish candlestick pattern you find on your chart;
you will need other technical tools to confirm your entries.
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THE CANDLESTICK TRADING BIBLE
We will talk about this in details in the next chapters. Right now, i just
want you to open your charts and try to identify all bearish candlestick
patterns that you find.
The bullish engulfing bar pattern
The bullish engulfing bar consists of two candlesticks, the first one is
the small body, and the second is the engulfing candle,
see the illustration:
The bullish engulfing bar pattern tells us that the market is no longer
under control of sellers, and buyers will take control of the market.
When a bullish engulfing candle forms in the context of an uptrend, it
indicates a continuation signal.
When a bullish engulfing candle forms at the end of a downtrend, the
reversal is much more powerful as it represents a capitulation bottom.
See the example below:
The example above shows us clearly how the market changes direction
after the formation of a bullish engulfing bar pattern.
The smaller body that represents the selling power was covered by the
second body that represents the buying power.
The color of the bodies is not important. What’s important is that the
smaller one is totally engulfed by the second candlestick.
Don’t try to trade the market using this price action setup alone,
because you will need other factors of confluence to decide whether
the pattern is worth trading or not, i will talk about this in the next
chapters.
What i want you to do now is to get the skill of identifying bearish and
bullish engulfing bar on your charts. This is the most important step
for the moment.
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