Bullish Engulfing Pattern

Bullish Engulfing Pattern is one of the strongest patterns that generates a buying signal in candlestick charting and is one of my favorites. The following figure shows how the Bullish Engulfing Pattern looks like.

The following conditions must be met for a pattern to be a bullish engulfing.

1. The stock is in a downtrend (short term or long term)
2. The first candle is a red candle (down day) and the second candle must be white (up day)
3. The body of the second candle must completely engulfs the first candle.

The following conditions strengthen the buy signal

1. The trading volume is higher than usual on the engulfing day
2. The engulfing candle engulfs multiple previous down days.
3. The stock gap up or trading higher the next day after the bullish engulfing pattern is formed.

Stock Chart for SOLF
Let’s look at the stock chart for SOLF. The stock formed two bullish engulfing patterns on the chart, one on 11/06/2009 and the other on 12/21/2009. The stock shot up both times after the pattern was found.

11/06/2009 Bullish Engulfing Pattern

Buy signal 1: 86.4% gain

- The stock closed at $5.59 on the bullish engulfing day and gone up to $10.42 on 1/11/2010. That is a 86.4% gain in 2 months.

12/21/2009 Bullish Engulfing Pattern

Buy signal 2: 36% gain

- The stock closed at $7.66 on the pattern day and moved up to $10.42. That is a 36% gain in less than a month.

Stock Chart for WNC

Let’s look at a more recent stock WNC.

Buy signal: 87% gain

- The stock closed at $2.94 on 02/25/2010 and formed a bullish engulfing pattern. In less than 10 trading days, the stock went up to $5.49 with a 87% gain.

Please note, in reality it is not easy to buy a stock at its lowest price and sell it at its peak. The good news is that you don’t need to sell at its peak to make a good fortune in the stock market.

Click the following link to get a list of bullish engulfing pattern stocks for today.

Bullish Engulfing Stocks