A bullish engulfing candle is a technical pattern known for predicting upcoming bullish activity in a stock. Engulfing candles look like this:
A bearish engulfing candle. A bullish engulfing candle would simply have the two colors swapped.
In order for a candle to become a bullish engulfing candle, the first candle’s “real body” (the block shown between the two wicks) must be completely covered on the top and bottom by the “real body” of the second candle. In other words, on the first day, a stock closes lower than it opens. On the second day, the stock opens even lower, however it closes higher than the open of the first day. As such, the range is bigger, the candle is larger, and it overhangs both sides of the original candle.
Bullish engulfing candles matter because they show points of reversal in stock trading. In other words, after opening low, bulls have stepped in, drawn their line in the sand, and proceeded to buy with such intensity that the stock has completely reversed yesterday’s negative performance and-then-some.
While today’s trading may not have seemed out of the ordinary, under the surface, change was brewing. That was in the form of 35 different stocks scoring bullish engulfing candles on the daily charts. Those stocks were as follows, with some stocks of note bolded:
- J +0.37%
- INTU +1.61%
- GM +0.27%
- KLAC +2.50%
- MTD +0.03%
- MOH +1.22%
- META +1.61%
- UNP +0.14%
- MU +6.21%
- MCHP +1.55%
- ON +2.69%
- BWA +1.30%
- NVDA +7.50%
- MPWR +4.48%
- MLM +0.64%
- EPAM +1.78%
- COO +0.92%
- NRG +0.93%
- AAL +1.41%
- AMD +4.32%
- SYK +0.95%
- CTSH +1.47%
- NCLH +0.68
- ETSY +3.54%
- ADBE +2.70%
- PPG +2.19%
- QRVO +1.32%
- ROK +1.01%
- PHM +1.53%
- ICE +0.82%
- ANET +1.94%
- DPZ +0.87%
- RSG +0.30%
- YUM +0.44%
- DHR +0.69%
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It’s important to note, before jumping into any of these trades, that the more volume is attached to a bullish engulfing candle, the better the signal. That means that many more traders and investors were willing to commit to bidding up the price. Still, this is a positive sign (at least for the short-term, as these daily charts offer daily trading signals) that the stock market, which has been in a rather negative environment over the past few weeks, is set for a bounce.
