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The bullish engulfing pattern

Two candles at the end of a downtrend: a small falling one, then a rising one whose body fully covers the first one's body. Unlike the hammer, this pattern needs no third candle to confirm it, it's the confirmation itself.

4 min read Last checked: 2026-09-26

The bullish engulfing pattern is made of two candles and counts as one of the stronger reversal signals because the confirmation is already built in.

What it's about

After a small falling candle, the price opens lower the next day but then rises so strongly that the close ends up above the first candle's open. Buyers have more than made up for the whole previous day's decline.

How to recognise it

  • The first candle falls, usually with a small body.
  • The second candle rises and its body fully covers the first one's body.
  • The pattern sits after a clear downtrend.
  • The bigger the second candle relative to the first, the stronger the signal counts.

What usually happens afterwards

Because the pattern already shows the turn, some buy right at the close of the second candle or at the next day's open. More cautious traders still wait another day to rule out a false breakout.

Where it misleads you

Even a bullish engulfing doesn't guarantee a turn, it only shows that buyers won the day. In a strong, broad downtrend that's often not enough to reverse the direction for good.

An example trade with made up numbers

Malik has €10,000 in his account and risks at most €150 per trade. A stock falls to €18, forms a bullish engulfing pattern there and opens the next day at €19.60. Malik buys at €19.60 and sets his stop loss at €17.60. With that distance, he buys 75 shares for €1,470.00. Costs: €1 each to buy and sell, plus about 2 cents of spread per share on each order.

If it works: The price rises to €24.00 and Malik sells. Malik is €330 ahead. After €2 in fees and €3 in spread, €325 is left.

If it goes wrong: The breakout fails and the stop fills at €17.50. That's a €157.50 loss, €162.50 with costs.

Malik placed his stop below the low of the pattern, not just below the second candle. That keeps him invested even through a short pullback.

Bullish engulfingPatternzerotoinvest.com
Bullish engulfing Sketch with made up prices. A small falling candle is followed by a rising candle whose body fully encloses the previous one.

Summary

  • A bullish engulfing pattern is two candles, the second fully covering the first.
  • Unlike the hammer it needs no third candle to confirm it.
  • A larger second candle and high volume count as a stronger signal.

Did you get it?

What does a bullish engulfing pattern consist of?

A falling candle followed by a rising one whose body fully covers the first.

Does the pattern need a further confirming candle?

No, the second candle is the confirmation itself, though some wait anyway to be cautious.

What points to a stronger signal?

A relatively large second candle with high trading volume.

Sources and further reading

  • StockCharts ChartSchool, Bullish Engulfing. View source ↗
  • Steve Nison: Japanese Candlestick Charting Techniques, 2nd edition 2001.

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