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When there is a downtrend and suddenly a green candle appears engulfing the body of the previous day with high and low crossing the previous day where the open of this candle was much lower than the previous day and managed to close higher than the previous day engulfing the entire previous day candle then a trend reversal is seen and a strong buy signal is given. The next day when prices crosses the point A of the engulfing candle a strong buy signal is given and stop loss should be the lowest point of the engulfing candle i.e. point B and difference of point A and B should be the sell target.
When a candlestick completely engulfed the previous candlestick it is engulfing pattern. If the engulfing candle is green in color, then we can buy. If the engulfing candle is red in color, then we can sell. Condition to qualify is good traded volumes.
When a candlestick completely engulfed the previous candlestick it is engulfing pattern. If the engulfing candle is green in color, then we can buy. If the engulfing candle is red in color, then we can sell. good traded volumes is seen.
After a uptreand if a bearish candle stick is formed engulfing the previous stick with good volume, then it indicates there is a trend reversal and we can short the stock.
Similarly for the downtrend.
Bullish Engulfing pattern is a case in candlestick price movement of a stock, where the latest positive(green) body should cover the entire previous day negative(red) body. This pattern occurs frequently and is reliable. It is more powerful when appears in the Reversal pattern i.e., after a recent price fall. Volume may increase on the engulfing day.
Entry price : The price point at which the price crosses the highest price of the two days(engulfing day and previous day).
Stop loss : Lowest price on the engulfing day(the point at which the buying started to take place).
Exit price : Difference between entry price and stop loss is Risk taken. Add the risk taken to the entry point. That marks the exit price.
Bearish engulfing pattern is the inverse of this.
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