Engulfing belongs to a candle formations (paterns) indicator type. (Read more about candle formations here)
Bullish Engulfing, and Bearish Engulfing
Bullish Engulfing is a reversal pattern consisting of three candles, which usually occurs after a strong downtrend. It gives a buy signal, and also indicates a potential support level.
Below is an example of the Bullish Engulfing pattern in a candle chart:
Bearish Engulfing is a bearish reversal pattern consisting of three candles, which usually occurs after an uptrend. It gives a sell signal, and also indicates a potential resistance level.
Methods of use:
1. When the Bullish Engulfing pattern (highlighted in green) occurs, it is a signal to buy.
2. When the Bearish Engulfing pattern (highlighted in red) occurs, it is a signal to sell.
