This is an indicator of the technical analysis of investments. In this case, it could be warning us that market prices will stop going down and start going up. Thus, we can make the corresponding decision with our investments.
This pattern is relatively easy to see on the chart. Thus, a larger candle with a white or light body surrounds a smaller one that is located to its left. Indicates the end of a price decline. It is more reliable in predicting changes than the bullish belt hold.
The volume in the bullish engulfing
The volume tells us the amount of financial assets that have been traded in a period of time. It is an indicator of the strength of the trend and one of the most relevant variables in price movements.
His movement is easy to interpret. If the market is down and the volume decreases this could indicate that there is going to be a change in trend. It would actually reinforce the bullish engulfing pattern if it were to appear.
Bullish Engulfing Characteristics
Let’s take a look at some of its most relevant features below.
- The previous trend must be bearish. This is perhaps the most important of all.
- The candle that is located to its left must be, in turn, bearish. Thus, the opening must be above the closing.
- You don’t have to wrap the entire previous range. Actually, the important thing is that it covers the real body of the candle, without the shadows.
- The bullish engulfing has its close above the open of the previous day and the open below the close of the previous candle.
Support and resistance
Support and resistance are similar to the concept of a price band. In this way, the support is the minimum from which the price begins to rise and the resistance would be the maximum from which it falls.
In this case, we must look at the shadows of the two candles, the enveloping one and the previous one. Support is at the lowest point of both and resistance at the highest. Below the first, the buying force is greater than the selling force, causing it to rise and vice versa.