Engulfing Candlestick Patterns Mean Trend Reversal!

If you are a serious trader, you need to master the art of predicting the u turns in the market or what are more precisely known as the trend reversals. Candlesticks Trend Reversal Patterns like the Engulfing Pattern can help you a lot in knowing when the market is going to take it’s u-turn.

Engulfing Candlestick Pattern is a two stick pattern that takes two days to form on your chart. On the first day you will find a small candle either bullish or bearish. On the second day if you find a large candle engulfing this small candle that is bullish if the first day candle was bearish or bearish if the first day candle was bullish, you have an Engulfing Pattern warning about a potential trend reversal in the market.

In case of the bullish engulfing pattern, the first day is down. But on the second day, heavy buying starts in the market. So much buying in the market takes place that it completely surpasses both the open and the high. On the other hand, in case of the bearish engulfing pattern, the setup day candle is bullish. On the signal day, heavy selling starts in the market forming a bearish candle that completely engulfs the first day candle.

The bigger the candle is on the second day, the more powerful signal it will be for a trend reversal that is about to happen in the market.

You need to confirm this trend reversal signal with another indicator like the CCI. This will make sure that any false signal is filtered out before you actually trade it.

Bulls and bears constantly battle for the control of the market. When a bullish engulfing pattern is formed, it means bulls are in total control of the market. Similarly when a bearish engulfing pattern is formed, it means bears are now controlling the market.

When it is a bullish engulfing pattern, it means the bulls are going to control the market for the coming days. Similarly when it is a bearish engulfing pattern, it means the bears will control the market for the days to come.

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