From Investopedia https://www.investopedia.com/terms/b/bullishengulfingpattern.asp

What Is a Bullish Engulfing Pattern?

A bullish engulfing pattern is a white candlestick that closes higher than the previous day’s opening after opening lower than the previous day’s close. It can be identified when a small black candlestick, showing a bearish trend, is followed the next day by a large white candlestick, showing a bullish trend, the body of which completely overlaps or engulfs the body of the previous day’s candlestick.

Note: This is not financial advice. You should consult your accountant or your financial advisor for any decisions you make.

A bullish engulfing pattern may be contrasted with a bearish engulfing pattern.

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KEY TAKEAWAYS

  • A bullish engulfing pattern is a candlestick pattern that forms when a small black candlestick is followed the next day by a large white candlestick, the body of which completely overlaps or engulfs the body of the previous day’s candlestick.
  • Bullish engulfing patterns are more likely to signal reversals when they are preceded by four or more black candlesticks.
  • Investors should look not only to the two candlesticks which form the bullish engulfing pattern but also to the preceding candlesticks.

Understanding a Bullish Engulfing Pattern

The bullish engulfing pattern is a two-candle reversal pattern. The second candle completely ‘engulfs’ the real body of the first one, without regard to the length of the tail shadows.

This pattern appears in a downtrend and is a combination of one dark candle followed by a larger hollow candle. On the second day of the pattern, the price opens lower than the previous low, yet buying pressure pushes the price up to a higher level than the previous high, culminating in an obvious win for the buyers.

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