6. Engulfing Candlestick

An Engulfing Candlestick pattern is one that is formed by 2 candlesticks.  The first candlestick has a smaller body than the second candlestick, and are of opposite colours.  In a Bullish Engulfing pattern, the first candle has a short red body, that is completely engulfed by the second larger green candle. Whilst for a Bearish Engulfing pattern, the first candle has a short green body, that is completely engulfed by the second larger red candle.

The Bullish Engulfing Candlestick pattern is the result of despite the market opening lower than the previous time, but the buying pressure in the bullish market pushes the price up, indicating a strong bullish trend forming.  As for a Bearish Engulfing Candlestick pattern, it is the result of despite the market opening higher than the previous time, but the selling pressure in the bearish market pushes the price down, indicating a strong bearish trend forming.  This could signal a trend reversal, or a continuation of a trend.

When one encounters a Bullish Engulfing pattern in a bullish trend, one can buy above the Bullish Engulfing pattern for a bullish continuation.  In the case of encountering a Bearish Engulfing pattern during a bearish trend, one can sell below the Bearish Engulfing pattern for a bearish continuation.