What is Engulfing Pattern?
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A white candlestick that starts lower than where it ended the previous day and ended higher than where it began the last day forms a bullish engulfing pattern. A small black (or red) candlestick, which symbolizes a bearish trend, is followed the next day by a sizable white (or green) candlestick, which represents a bullish trend, with the latter candlestick's body entirely engulfing or overlapping the former, it can be seen.
How to interpret a bullish engulfing pattern?
Two-candle candlestick reversal patterns define the bullish engulfing pattern. Regardless of the size of the tail shadows, the second candle totally "engulfs" the first candle's true body. This candlestick pattern, which consists of a smaller hollow candle followed by a larger black candle, develops during a decline. The price opens lower than the previous low on the pattern's second day, but buying pressure causes it to rise to a greater level than the prior high, resulting in a clear victory for the buyers.
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Why would a bullish engulfing pattern exist?
More than just a white candlestick showing price movement up, followed by a black candlestick showing price movement down, constitutes a bullish engulfing pattern. The black candlestick from the day before would not have been able to be swallowed by the body of the white candlestick if the price hadn't gapped down.
The white candlestick in a bullish engulfing pattern denotes a day when bears initially controlled the price of the stock in the morning before bulls decisively took control by the end of the day because the stock opens lower than it did on Day 1 and closes higher than it did on Day 1.
If there is any upper wick at all, it is usually modest on the white candlestick of a bullish engulfing pattern. This indicates that the day ended as the price was still rising sharply upward because the stock closed at or very close to its highest price.
Reversals of bullish engulfing candles
Investors should also look closely at the candlesticks that came before the two that make up the bullish engulfing pattern. It will be easier to determine whether the bullish engulfing pattern represents a genuine trend reversal in light of this wider backdrop.
=> Conclusion
Candles that completely engulf one another frequently represent a market trend reversal. In this particular pattern, there are two candles, with the second candle "engulfing" the first candle's entire body. Depending on where the candle is in relation to the trend, it can be bullish or bearish to see an engulfing candle.
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