In Japanese candlestick terminology, a bullish engulfing pattern occurs after a series of red (or black) candles in a downtrend, when a large green (or white) candle is said to “engulf” the previous day’s candle. The reason why the green candle engulfs the smaller, red candle is because the size of the body of the bigger candle is larger than the total size of the previous day’s candle.
The larger the green candle, and the more it engulfs the previous red one, the more bullish the pattern is said to be. As with other reversal patterns, confirmation is key. In sum, the bullish engulfing pattern shows a change in sentiment, as bulls aggressively take the initiative back away from bears after a downtrend.
My top idea on my list of scans right now is $SAPE. I currently have no position in the name. Check out the current daily chart to see just how big the engulfing candle is. I am looking for a strong close today, with some more volume coming in, as well as confirmation of the reversal in the coming days.
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