A bullish engulfing pattern occurs in the candlestick chart of a security when a large candlestick fully engulfs the smaller candlestick from the previous trading session. This pattern usually occurs during a down trend and is thought to signal a bottom or the beginning of a bullish trend within chart.
As the name would imply this formation suggests a change in trend and favor for the bulls, but should only be taking seriously when the stock is in a downtrend so be sure to ignore this pattern if the chart is in an up or sideways trend.
This is often a very bullish sign in short term trading as these down trending stocks have finally gotten some support and often will put in another move to the upside on the following trading day.
Examples of what a bullish engulfing candle looks like on a chart:
The Following Trading Session:
Why is this worth looking at?
The Bullish Engulfing Pattern, and its bearish counterpart, the Bearish Engulfing Pattern, are both fantastic signals to learn to recognize. Not only do the both patterns occur quite often, but they both also have good track records of playing out in the proper direction.
Bullish Engulfing Scan
The Bullish Engulfing Scan is an algorithm-based scan of a select universe of US-listed stocks to find stocks that have made a bullish engulfing candle on the daily chart.