The stock market is the essential backbone of a country’s economy. The Economy grows up with stock market trading. Stability in the stock market is very necessary.
The Stock market got ups and downs every day. Sometimes stocks got pumped up while sometimes it got crashed. Investment, as well as the participation of mass people, can get the market reinforced. Investing money in the stock market is a stressful job as there are continuous ups and downs in prices.
One of the important factors that affect the stock market is bullish engulfing pattern chart. If you are new to the stock market and want to know more about the topic then keep reading this article.
Bullish Engulfing pattern
Bullish Engulfing pattern:
Bullish engulfing candle pattern is one of the stock trading strategies which normally appears in the fluctuation of buying pressure in the market. It normally occurs at the bottom of the downtrend when suddenly more buyers drive to enter the market and push the price higher than before.
The bullish engulfing pattern also defined as the two candle reversal pattern process where the second candlestick in the pattern can completely overlap the first candlestick in the pattern chart. While engulfs the first candlestick, the second one doesn’t even consider the shape of its top to bottom point. In this method the smaller first candlestick declared as the bearish trend. The following larger one which is the representation of the next day in the chart identified as the bullish trend.
The opening stock price of bullish engulfing should be the lowest but the closing price should be the highest one. It should be lower than the bearish closing price from and higher than the bearish opening price from the first day. The body of the bullish candlestick should engulf the bearish one. Otherwise, it can not be called a bullish pattern. Also the recent fall in price level should witnesses in the bullish engulfing.
Using The Bullish Engulfing Candle Pattern:
This engulfing pattern tells you about the stock price movement through downward. The second-day opening price should be lower than the first-day closing price. This is a requirement for establishing the bullish engulfing candle pattern in the chart.
If the gap between the prices didn’t happen, the second candle cannot be able to engulf the previous one. In the chart, the bullish candle represents bearing a controlled price level at the beginning time of the stock on that day. While at the end of the day it bulls decisively to take over the stock.
In this process, it treads the reversal to the upside which tells investors the selling pressure of the stock. The selling pressure can lose momentum at this specific level. It normally indicates a short term change in sentiment of stock. The prices can easily push sharply higher. This high price can start a new trend in the opposite direction in the stock. Again it can also just head towards the correction procedure to the previous running trend.
The bullish engulfing pattern tells you some upper wick in the stock. The price was still surging upward while the trading day ended. So it can be a chance to get more money if the stocks were bought. Hoping that another bullish candlestick in the next day.
So the traders intended to buy. Thus the stock market got pumped up and many more come out for buying stocks watching the reinforced condition.
Limitations:
The process got some limitations also. This bullish engulfing pattern will tell you it is a powerful indicator in the stock market. It goes with the current trend. But sometimes it brings the wrong message for the traders.
This pattern indicator is not fully proofed sometimes. There can be some choppy conditions in the market and this indicator maybe give you wrong information to go in. Even if the price rising overall but the significance of the chart got minimized.
Also, the bullish engulfing candle may be very big. If the trader chose to follow according to the pattern, that will lead him to a huge loss. Also sometimes it can lead to profit if the luck is in favor. But the change of getting the reward from this pattern may not justify the high risk from it.
Sometimes it can’t provide a specific price target so traders need to depend on other methods to do a profitable trade.
Final Thoughts:
Despite some limitations, the bullish engulfing candle pattern can be helpful in trading. It gives the complement in candle formation with supporting hand. It leads to trading with confidence. The traders should not look upon to only the two candlesticks in the pattern chart.
He should look for the preceding candlesticks before trading. Thus it’ll be beneficial for his trading in the stock market. In this article, we have described the usage of the bullish engulfing pattern. Hope you found this information useful.
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