UK Accounting Glossary
The bullish engulfing pattern is a relatively simple candlestick charting pattern consisting of one black candle followed by a longer white candle — it is a bullish reversal pattern. The body of the black candle in a bullish engulfing pattern may be of any length. The body of the white candle in a bullish engulfing pattern completely covers or “engulfs” the body of the preceding black candle. In other words, the white candle in a bullish engulfing pattern opens lower than the black candle’s closing price and closes higher than the black candle’s opening price. In an ideal bullish engulfing pattern, the body of the white candle will also engulf the black candle’s shadows but it is not a requirement. The bullish engulfing pattern signals a positive reversal in sentiment regarding a stock, commodity, index, etc. If a stock is oversold or has been in a downtrend, technical analysts tend to view the bullish engulfing pattern as a fairly reliable bullish signal. Further, market technicians tend to consider that the longer the white candle and the more pronounced its coverage of the black candle, the stronger the reversal indicated by the bullish engulfing pattern.
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This glossary post was last updated: 4th February 2020.