BULLISH ENGULFING PATTERN
A bullish engulfing pattern is a strong bullish reversal candlestick pattern for intraday or swing trade in a downtrend market near the support zone or demand zone. We can follow a bullish engulfing pattern like a Hammer candle.
Since bullish engulfing is a two-candle pattern, the first candle should have a red body and the second candle should have a green body. The second candle with a green body should completely engulf(cover) the first candle with a red body.
You can see this in the below image
We can see the bullish engulfing pattern in the image above. The second candle with a green body should completely engulf (cover) the first candle with a red body. The wick of the candle need not be covered. We just have to compare body to body no need to follow wick or shadow.
How to work Bullish engulfing?
It is very important to look for a bullish engulfing pattern at specific zones. In our strategy, our specific zone is a support zone. A support zone is a zone where the price makes a low and bounces back upwards from that low. You may also call it a swing low wherein the price is in a downtrend, it pauses at a certain zone or it halts at a certain zone and moves upwards. The zone from which it made a low and bounced back is called the support zone or the swing low zone.
In the above chart, the Market was in a downtrend & reached near support zone in support zone, The green candle formed after the red candle and, a strong green candle and engulfed the previous red candle. After the Bullish engulfing pattern, you have to enter for a long position.
You can see in the above chart
What should be the stop loss & target in the Bullish Engulfing pattern?
After the Bullish engulfing pattern, you have to enter for a long position. A bullish engulfing pattern low should be your stoploss which is a very small stoploss with a high target of at least 1-2% of the Stock price or you can go to the upper resistance level.