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Double-candle reversals are very important since they are one of the most common reversal setups and basically represent a scenario when the market made a strong move in one direction and right after that another strong move, but in the opposite direction. These moves have many variations and are basically a part of each reversal, which is why it is important to be able to identify them so you can place an order when a strong move is about to happen.

Engulfing Pattern

The engulfing pattern consists of two candlesticks with the first candlestick being a relatively short candlestick with a short real body and the second being a large candlestick with a big real body that engulfs the real body of the first candlestick. It can appear at the bottom or top of the market trend to indicate a strong reversal.

The engulfing pattern can be either bearish or bullish, depending on its location on the price chart. In addition, the colors of the candlesticks are significant.

Bullish Engulfing Pattern

The bullish engulfing candle appears at the bottom of a downtrend indicating a strong reversal. The pattern involves two candles with the second candle completely engulfing the “body”of the previous red candle. In the daily chart, the bullish engulfing pattern comes from the incredible change of sentiment from a bearish gap down in the morning, to a large bullish real body candle that closes at the highs of the day. Bears have overstayed their welcome and bulls have taken control of the market.

The bullish engulfing candle pattern can be traded by traders in the daily chart presented below. Here, the pattern is shown in a downtrend. Traders can start to enter