6# Bullish Engulfing Pattern Trading System
Reversal Pattern
Submit by JanusTrader
This two candle pattern is one of the most powerful indicators of a change in
trend. The Bullish Engulfing Pattern is formed at the end of a downtrend. A
green body is formed that opens lower and closes higher than the red candle
open and close from the previous day.
This completely engulfs of the previous
day's candle body and represents overwhelming buying pressure overcoming
the selling pressure.
A Bullish Engulfing signal is one of the major signals. Like the Doji, if it occurs
at or near a major level of previous support it indicates that a high probability
trade is setting up. However unlike the Doji you can enter at the open of the
next candle.
Description
The Engulfing pattern is a major reversal pattern comprised of two opposite
colored bodies. The Bullish Engulfing Pattern formed after a downtrend. It
opens lower that the previous day’s close and closes higher than the previous
day’s open. Thus, the green candle completely engulfs the previous day’s red
candle.
Criteria
The body of the second day completely engulfs the body of the first day.
Wicks are not a consideration
There is a definable down trend, even if it has been short term.
Prices are at a major level of resistance.
Additional Pattern Enhancements
A large body engulfing a small body.
A large body engulfing a small body.
If the engulfing body engulfs several previous candles.
If the engulfing body engulfs the body and the wicks of the previous day
If the pattern forms after a Doji
In the pictures Bullish Engulfing Pattern forex system in action.
Here we had a Doji/Pin bar candle on May 25 followed by a bullish engulfing
candle. The trade was entered the next day at 1.41396. The stop was placed
a few pips under the Doji/Pin bar wick at 1.39868 for 150 pips. Take profit
was placed at the weekly resistance at 1.4634 for 490 pips. Profit target was
hit on June 3.
In this example the support at 85.460 held for about a week with no candle
closing below it. On Jan 21 a bullish engulfing candle formed, entry was at
the open of the next candle at 86.308. Stop was set below the previous
candle at 85.470 for 86 pips. Take profit was set at the daily resistance at
87.657 for 132 pips. Take profit was achieved on Jan 27
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