How to identify

1.   A downtrend is under way 2.   A long black day occurs 3.   The second day is a white day that completely engulfs the real body of the first day

With the Engulfing bull pattern a downtrend is in place when a small black body day occurs with not much volume. The next day, prices open at new lows and then climb to a new two day high. The rise is sustained by high volume and finally closes above the open of the previous day. Emotionally, the downtrend has been damaged. If the next (third) day's prices remain higher, a major reversal of the downtrend has occurred. Confirmation of the trend reversal would be with a white candlestick, a large gap up or by a higher close on the next trading day would confirm the trend reversal.

The Engulfing bull pattern is also the first two days of the Three Outside Up bull pattern. Because of this, the Engulfing bull pattern is not considered as reliable as the Three Outside Up bull pattern.

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