Bullish Engulfing
Candlestick PatternsA two-candle bullish reversal pattern where a large green candle completely engulfs the body of the preceding red candle. It signals strong buying momentum after a decline.
What Is a Bullish Engulfing Pattern?
The bullish engulfing is a two-candle reversal pattern that forms during a Downtrend. The first candle is a relatively small red (bearish) candle. The second candle is a larger green (bullish) candle whose body completely covers the first candle's body. The second candle opens below the first candle's close and closes above its open.
This pattern shows a decisive shift in control from sellers to buyers within just two sessions.
Trading the Bullish Engulfing
The pattern is most effective at key Support zones. On GBP/USD, a bullish engulfing at a weekly support level gives a strong long entry signal. Enter at the close of the engulfing candle or on a pullback to its midpoint. Set a stop below the engulfing candle's low.
The larger the second candle relative to the first, the stronger the signal. If the engulfing candle also swallows the wicks (not just the body) of the prior candle, that adds conviction.
What to Watch For
Avoid bullish engulfing patterns that form in the middle of a sideways Range. These have no directional bias behind them. The pattern also loses reliability on very short timeframes (1-minute, 5-minute) where noise dominates price action.
Related Terms
Bearish Engulfing
A two-candle bearish reversal pattern where a large red candle completely engulfs the body of the preceding green candle. It signals strong selling pressure after a rally.
Morning Star
A three-candle bullish reversal pattern consisting of a large red candle, a small-bodied candle (often a doji), and a large green candle. It signals the end of a downtrend.
Piercing Pattern
A two-candle bullish reversal pattern where a green candle opens below the prior red candle's low and closes above its midpoint. It signals buying strength emerging in a downtrend.
Hammer
A bullish reversal candlestick with a small body at the top and a long lower wick at least twice the body length. It appears at the bottom of a downtrend.