Bullish Engulfing Candlesticks:

Bullish Engulfing Candlestick Patterns
Type : Reversal
Direction : Bullish
Prior Trend : Bearish
Reliability : High
Generally forex traders say that bullish engulfing is a medium bullish reversal pattern but I consider this as a very strong bullish pattern when combined with other indicators like support lines or support trend lines. So I am putting it under strong bullish reversal patterns instead of medium bullish reversal patterns. A bullish candlestick pattern consists of a two candlesticks in which the first candlestick is completely occupied by the second candlestick.
How to recognize bullish engulfing candlestick pattern:
1) The market is in a downtrend.
2) A strong bearish candlestick forms.
3) After the bearish candlestick, a bullish candlestick forms with the opening price same as the closing price of the bearish candlestick or below the closing price of the bearish candlestick.
4) The bullish candlestick closes above the bearish candlestick.
Generally a bullish engulfing pattern should have the bullish candlestick opening price below the close price of the bearish candlestick like the second one in the above picture. But I still consider the pattern as a bullish engulfing pattern even if the close price of the bearish candlestick and open price of the bullish candlestick are same like the first one in the above picture.
Important Factors:
The size of the first and second candlesticks plays an important role in the reversal of the trend. For example if the first candlestick of the bullish engulfing pattern is a very small candlestick and the second candlestick is a very long candlestick there is is a very high probability for price reversal.
Use some other indicators like trend lines, Bollinger Bands, CCI, Stochastics with bullish engulfing pattern to confirm the price reversal.
The following are some of the real time examples for different currency pairs.
EURJPY Bullish Engulfing Candlesticks:

EURJPY Bullish Engulfing Candlestick Pattern
GBPUSD Bullish Engulfing Candlestick Pattern:

GBPUSD Bullish Engulfing Candlestick Pattern
How To Trade Bullish Engulfing:
The reason I put bullish engulfing in strong bullish reversal patterns instead of medium bullish engulfing patterns, as I explained above, is they are very effective with other indicators. The following are some of the ways you can use engulfing bullish candlestick patterns with other indicators.
1) Bullish engulfing at support lines
If a bullish engulfing candlestick pattern is formed at the support line this is a very good opportunity to enter a long trade. I have taken many successful trades and they always worked very well. Check the following pictures.
GBPUSD hourly chart bullish engulfing candlestick pattern at support line:
The following is the GBPUSD hourly chart. You can see the support line at the bottom and a bullish engulfing candlestick pattern is formed at the support line and the price bumped up.

GBPUSD Bullish Engulfing at Support Line
Another GBPUSD hourly chart bullish engulfing candlestick pattern at support line:
The following is another GBPUSD hourly chart with a support line. A bullish engulfing candlestick pattern is formed at the support line and the price reversed.

Another GBPUSD Bullish Engulfing at Support Line
GBPJPY four hour chart bullish engulfing candlestick pattern at support line:
The following is the GBPJPY four hour chart.You can see that a bullish candlestick pattern is formed at the support line and the price bumped up.

GBPJPY Four Hour Bullish Engulfing at Support Line
2) Bullish engulfing at trend lines
If at any trend line that you draw a bullish engulfing candlestick pattern is formed, it is very good opportunity to enter a long trade.
GBPUSD hourly chart bullish candlestick at support trend line:
Check the following picture. It is a GBPUSD hourly chart and you can see a support trend line. There is bullish engulfing candlestick formed at the support trend line and the price reversed.

GBPUSD Bullish Engulfing at Support Trend Line
3) Bullish engulfing in an uptrend
When the price is in an up trend there will be short reversals. If in the reversals a bullish engulfing candlesticks pattern is formed it is a very good opportunity to enter a long trade. Check the following currency pairs.
EURJPY hourly chart bullish engulfing in an uptrend:
The following is the hourly chart for EURJPY currency pair. You can see that the currency pair is in an uptrend. In the uptrend the price reversed back and a bullish engulfing pattern is formed. So this is a good opportunity to enter long trade at this point.

EURJPY Hourly Chart Bullish Engulfing in Uptrend
EURUSD hourly chart bullish engulfing in an uptrend:
The following is the hourly chart for EURUSD currency pair and the pair is in an uptrend. The price reversed back and a bullish engulfing candlestick is formed. and the priced followed the trend.

EURUSD Hourly Chart Bullish Engulfing in Uptrend
4) Bullish engulfing when resistance becomes support
Support and resistances are very common in forex trading and sometimes when the price crosses them they act in reverse. For example when price crosses a support line and the price reverses back the support line may act as a resistance line. The same way when the price crosses a resistance line and reverses back the resistance line may act as a support line. In this case if a bullish engulfing signal is formed we can enter a long trade. Check the following currency pair.
GBPCAD bullish engulfing when resistance becomes support:
The following is the GBPCAD currency pair and you can see a resistance line for this currency pair. The price crossed the resistance line and it reversed back. When it reversed back at the resistance line a bullish engulfing candlestick is formed and the resistance became a support line and the price bumped up.

GBPCAD Bullish Engulfing When Resistance Becomes Support
5) Bullish engulfing and divergence
Divergence occurs when the price forms the lower lows but MACD shows higher lows. At this point if a bullish engulfing candlestick is formed you can enter a long trade. Check the following currency pair examples.
EURUSD hourly chart MACD divergence and Bullish engulfing:
The following is the hourly chart of EURUSD and you can see that there is divergence formed. The price is showing a lower lows and the MACD showing a higher lows and a bullish engulfing candlestick pattern formed and the price reversed here.

EURUSD Hourly Chart MACD Divergence and Bullish Engulfing
GBPUSD hourly chart MACD divergence and Bullish engulfing:
The following is the hourly chart of GBPUSD and the price is showing lower lows but MACD is showing higher lows and it formed a divergence. A bullish engulfing candlestick pattern is formed at this point and the price reversed.

GBPUSD MACD Divergence and Bullish Engulfing
VN:F [1.8.7_1070]
Rating: 0.0/10 (0 votes cast)
VN:F [1.8.7_1070]