What Is Engulfing Pattern?
An engulfing pattern is a candlestick chart pattern that is commonly used in technical analysis to identify potential trend reversals. It is formed when a small candlestick is followed by a larger candlestick that completely engulfs the previous candlestick. The larger candlestick can be bullish or bearish, depending on the trend direction.
Engulfing patterns are typically composed of two candlesticks, with the second candlestick completely engulfing the first. The first candlestick is often referred to as the "shadow" or "wick," while the second candlestick is referred to as the "body." The body of the second candlestick must completely engulf the body of the first candlestick in order for the pattern to be considered valid.
Bullish Engulfing Pattern:
A bullish engulfing pattern occurs when a small red candlestick is followed by a larger green candlestick. The green candlestick completely engulfs the red candlestick, indicating that the bulls have taken control of the market and are likely to push prices higher.
Bearish Engulfing Pattern:
A bearish engulfing pattern occurs when a small green candlestick is followed by a larger red candlestick. The red candlestick completely engulfs the green candlestick, indicating that the bears have taken control of the market and are likely to push prices lower.
Engulfing patterns are typically used in combination with other technical analysis tools and indicators to confirm potential trend reversals. Traders and analysts will often look for other signals, such as support and resistance levels or overbought/oversold conditions, to confirm the validity of the pattern before making trading decisions.
In conclusion, engulfing patterns are an important tool in technical analysis that can help traders and analysts identify potential trend reversals. By understanding how to identify and interpret these patterns, traders can make more informed trading decisions and improve their overall profitability.
1. Bullish Engulfing
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