Bullish Engulfing
The Bullish Engulfing is a candlestick patterns indicator used in Skyrexio Strategy Builder for pattern recognition and reversal/continuation signals.
Introduction
The Bullish Engulfing is a bullish reversal candlestick pattern that signals potential LONG opportunities or SHORT position exits. This two-candle pattern occurs when a large bullish candle completely engulfs the previous smaller bearish candle, indicating strong buying pressure overwhelming selling pressure.
How Bullish Engulfing Works
Bullish Engulfing is a two-candle bullish reversal pattern with specific characteristics:
• Complete engulfment - The bullish candle's body completely contains the previous bearish candle's body • Opening gap down - The bullish candle opens below the previous candle's low • Closing above - The bullish candle closes above the previous candle's high • Volume confirmation - Higher volume on the engulfing candle strengthens the signal • Context matters - Most effective at support levels or after downtrends
Key Characteristics
Category
Candlestick Patterns
Type
Bullish Reversal Signal
Primary Use
LONG entries, SHORT exits
Timeframe
All timeframes supported (1m to 1M)
Confirmation
Volume, support levels, trend context
Strategy Applications
🟢 LONG STRATEGY (Primary Use)
Bullish Engulfing is primarily a LONG signal - enter long positions when the pattern appears.
Base Entry Order (LONG)
Base Order Condition: Bullish Engulfing Pattern Detected
First Condition: Bullish Engulfing
Timeframe: 1H
Additional Confirmation:
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1HAdditional Entry Orders (LONG)
Additional Entry 1: Pattern confirmation with momentum
First Condition: RSI
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 40
OR
Additional Entry 2: Breakout above resistance
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1HTake Profit Orders (LONG)
Rule 1: Exit condition - Target reached at resistance level
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1H
OR
Rule 2: Exit condition - Overbought momentum warning
First Condition: RSI
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 75
OR
Rule 3: Exit condition - Bearish reversal pattern detected
First Condition: Bearish Engulfing
Timeframe: 1HStop Loss Orders (LONG)
Rule 1: Stop loss - Pattern invalidated (price below engulfing low)
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1H
OR
Rule 2: Stop loss - Volume surge breaks bullish momentum
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H
OR
Rule 3: Stop loss - Bearish momentum confirmed
First Condition: MACD Line
Timeframe: 1H
Operator: Cross Below
Second Condition: MACD Signal Line
Timeframe: 1H🔴 SHORT STRATEGY (Secondary Use)
Bullish Engulfing can be used in SHORT strategies as an exit signal or contra-trend bounce entry in overbought conditions.
Counter-Trend Risk: Using Bullish Engulfing for SHORT entries is high-risk and should only be considered in extreme overbought conditions with very tight risk management.
Base Entry Order (SHORT) - Contra-trend bounce
Base Order Condition: Bullish Engulfing in overbought market
First Condition: RSI
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 75
AND
First Condition: Bullish Engulfing
Timeframe: 1HAdditional Entry Orders (SHORT) - Not recommended
Additional entries not recommended for SHORT strategy using Bullish Engulfing. Use other bearish indicators like:
Bearish divergence indicators
Take Profit Orders (SHORT) - Exit existing positions
Rule 1: Exit condition - Bullish Engulfing signals trend reversal
First Condition: Bullish Engulfing
Timeframe: 1H
OR
Rule 2: Exit condition - Support level reached
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1H
OR
Rule 3: Exit condition - Oversold momentum exhaustion
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 22Stop Loss Orders (SHORT) - Protect existing positions
Rule 1: Stop loss - Bullish Engulfing confirms uptrend
First Condition: Bullish Engulfing
Timeframe: 1H
OR
Rule 2: Stop loss - Resistance breakdown confirmed
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1H
OR
Rule 3: Stop loss - Volume confirms breakout
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1HAdvanced Strategy Combinations
Multi-Timeframe Bullish Engulfing (LONG)
Support Level Bounce (LONG)
Risk Management Guidelines
Position Sizing
LONG Strategy
Standard
Pattern appears at support
SHORT Strategy
Reduced (25-50%)
Counter-trend plays only
High Volume
Increase confidence
Can use larger size
Low Volume
Reduce size
Wait for confirmation
Pattern Reliability Factors
✅ Appears at established support levels ✅ High volume on engulfing candle ✅ Follows extended downtrend ✅ Confirmed by momentum indicators
Best Practices
For LONG Strategies
Wait for support - Best results when pattern forms at key levels
Volume confirmation - Ensure high volume on engulfing candle
Trend context - Most effective after downtrends or at support
Quick execution - Enter on pattern completion, don't wait
For SHORT Strategies
Extreme overbought only - Only consider in deeply overbought conditions
Counter-trend risk - Use smaller position sizes
Quick profits - Take profits fast on any decline
Tight stops - Use very tight stop losses
Common Mistakes to Avoid
Wrong direction - Don't go SHORT on Bullish Engulfing without extreme overbought conditions
No context - Ignoring support/resistance levels and trend direction
Volume ignored - Trading pattern without volume confirmation
Late entry - Entering after pattern has already played out
Market Conditions Analysis
Downtrend
🟢 High (reversal signal)
🔴 Very Low (against trend)
Uptrend
🟡 Medium (continuation)
🔴 Low (counter-trend)
Ranging
🟢 High (at support)
🟡 Medium (at resistance only)
High Volatility
🟢 High (clear signals)
🔴 Low (whipsaws)
Low Volume
🔴 Low (wait for confirmation)
🔴 Very Low (avoid)
Related Patterns
Conclusion
Key Takeaways
PRIMARY USE: LONG entries at support levels
SECONDARY USE: SHORT exits when holding positions
TERTIARY USE: Counter-trend SHORT entries (high risk, overbought only)
ALWAYS: Confirm with Volume and respect market context
Success with Bullish Engulfing requires understanding its bullish nature and using it appropriately within the context of your overall trading strategy. Never fight the pattern's natural direction without compelling overbought conditions and proper risk management.
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