The Bearish Engulfing and Bullish Engulfing Candlestick Pattern

The Bearish Engulfing candlestick pattern is a reversal pattern. The pattern has two candles. The first candle is small and bullish. The second candle is long and bearish. In this pattern, the second candle completely covers the first candle. So, it’s called the Bearish Engulfing pattern.

The pattern forms at the peak of an uptrend. In an uptrend, sellers anticipate a change in trend due to psychological or fundamental reasons. They start pushing the stock prices down to form the second candle. This shows the selling pressure in the market. This suggests a possible change in trend.

The Bullish Engulfing candlestick pattern is a reversal pattern. The pattern has two candles. The first candle is small and bearish. The second candle is long and bullish. In this pattern, the second candle completely covers the first candle. So, it’s called the Bullish Engulfing pattern.

This pattern forms at the bottom of a downtrend. In a downtrend, buyers anticipate a change in trend due to psychological or fundamental reasons. They start pushing the stock prices up to form the second candle. This shows the buying pressure in the market. This suggests a possible change in trend.

These patterns are useful for trend determination. The Bullish Engulfing pattern is used as an entry point. The Bearish Engulfing pattern is used as an exit point. It’s advisable to use a combination of patterns and indicators to determine your trading strategy.

Recently, we’ve seen the Bullish Engulfing pattern in ExxonMobil (XOM), Anadarko Petroleum Corporation (APC), and EOG Resources (EOG). In contrast, Verizon Communications (VZ) and Southwest Airlines (LUV) are showing the Bearish Engulfing pattern.