Basics of Technical analysis: Bearish and Bullish Engulfing Pattern

Bullish and Bearish engulfing patterns are candlestick patterns that depict a reversal of the market’s current trend

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Bullish and Bearish engulfing patterns are candlestick patterns that depict a reversal of the market’s current trend. In such a candlestick design, there are two candles, with the second candle “engulfing” the first candle’s entire body. Depending on where it occurs in reference to the current trend, the engulfing candlestick can be bullish or bearish.

What is a Bearish Engulfing pattern?

The Bearish engulfing pattern predicts a market decline following a rise in cryptocurrency prices. The inverse pattern indicates that the bears have taken over the market by driving down prices and boosting selling pressure. This turnaround is the result of more sellers entering the cryptocurrency market.

Source: IG

The figure shows the pattern of two candles, red and green. It clearly depicts that the second red candle (bearish) is larger (almost twice) than the previous green candle and “engulfs” it. 

What is a Bullish Engulfing pattern?

The Bullish Engulfing Pattern shows that the crypto market has reversed its downward trajectory due to an increase in the prices of cryptocurrencies. This is due to a surge of buyers in the market, propelling trend reversal in the market. 

Source: IG

In the figure, the first red candlestick shows that the market was under the grasp of the bears. In the second phase, the market rises despite opening lower than the close in the first red candle due to bullish forces. The green candle becomes so large that it “engulfs” the red candle.

Key differences between Bearish and Bullish Engulfing Patterns

Source: Elearnmarkets

How to trade the Bullish and Bearish Engulfing patterns?

A bearish engulfing pattern alerts traders to the impending start of a downtrend, which is sometimes interpreted as a signal to start trading short or “short-selling” the market. The pattern also signals traders who want to go long to think about selling their position.

Following a prior negative run, the bullish candlestick informs traders that buyers are fully in charge of the market. Going long, or buying the market, is frequently interpreted as a signal to take advantage of the market reversal. The bullish pattern also signals short-term traders to think about capping their position.

Significance of the Patterns

Bearish and Bullish engulfing patterns provide a thorough understanding of how cryptocurrency prices change. To analyze the price movement represented by the patterns generated on the chart, a full comprehension of the concept is necessary. If thoroughly considered, they can assist traders in making wise judgments at the appropriate time.

Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

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