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We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- Multiple candlestick patterns evolve over two or more trading days.
- The bullish engulfing pattern evolves over two trading days. It appears at the bottom end of a downtrend. Day one is called P1, and day two is called P2.
- P1 is a red candle in a bullish engulfing pattern, and P2 is a blue candle. P2’s blue candle completely engulfs P1’s red candle.
- A risk-taker initiates a long trade at the close of P2 after ensuring P1 and P2 together form a bullish engulfing pattern. A risk-averse trader will start the business the day after P2, near the close of the day.
- The stop loss for the bullish engulfing pattern is the lowest low between P1 and P2.
- The bearish engulfing pattern appears at the top end of an uptrend. P2’s red candle completely engulfs P1’s blue candle.
- A risk-taker initiates a short trade at the close of P2 after ensuring P1 and P2 together form a bearish engulfing pattern. After confirming the day includes a red candle, the risk-averse trader will start the business the day after P2.
Sir,
If we have downtrend move and the last candle of that down move
Is red and next candle is green in which it’s open is higher than privious day red candle close and the close of green candle is higher than open of red candle .
Now what will happen
That seems like a variation of a bullish engulfing pattern. You can go long provided you are satisfied with all other things in the checklist.
As the Green Candle open is higher than the previous Red candle close it doesn’t satisfy the BULLISH ENGULFING PATTERN condition the trend will not change and will continue the down
Yes, Suresh. It is ok if there is a small gap up compared to P1.
Wont this be a sign of a reversal..?!
Almost all candlestick patterns indicate reversals 🙂
Hi Karthik, seems to be erroneous statement at interval 15:50 – 16:11. It should be ‘bears are in full control’ and not ‘bulls are in full control’, since it’s a downtrend. Please review once.
Let me check this, Satyakam.
At 3:14 of the video, notice that you said the CLOSE of D2 is greater than the OPEN of D1. That is absolutely false according to me. Do check and do the necessary corrections in the video ASAP as it may be misleading for new investors/traders like me. BTW, love your explanations and continue doing the good work😊👍!
Navya, let me check that. Thanks for pointing it out 🙂