Bullish and Bearish Engulfing Candlestick Patterns Explained -- with David Moadel
welcome to looking at the markets with David Modell today I'm going to talk
about the bearish engulfing pattern and the bullish engulfing pattern for stock
chart candlesticks doesn't have to be stocks could be commodities crypto
currencies Forex whatever it is okay so just a quick review Green Day and I I
have a whole other video where I explain how candlesticks work and I'll put that
link in the description of this video as well as a link to my plate I have a
playlist full of technical indicator videos lots of them alright so check
those out in the description below this video okay but just a really quick
review with candlesticks the rectangle part that's called the body and the line
on top and the line on bottom on the bottom if they have it some candlesticks
don't have these lines some do but these two lines are called wicks or shadows
all right and if it's green that means that the price of the stock commodity
whatever it is closed higher and if it's red that means that the price closed
lower than it opened all right so this is the bearish engulfing candlestick
pattern involving two candlesticks and this is the bullish engulfing pattern
again involving two candlesticks both of these patterns involve the relationship
of one candlestick to the next one all right so a bearish engulfing pattern
forms when the red body of the second candle again the body is this rectangle
here when the red body of the second candle fully engulfs or covers the
entire previous green candles body so you see how this red body is so much
bigger than the green body that the top of the red one is higher than the top of
the green one and the bottom of the red one is lower than the bottom of the
green one that's called engulfing it it means it covers the entire body of the
first one the second one covers the entire body of the first one alright or
in engulfs it so now when it's at the top of an
uptrend of candlesticks you got all these candlesticks going up and then
this happens that's considered a reversal candle and that's bearish
meaning people expect sometimes that it's gonna stop the candlesticks are
gonna stop going up and they might start going down that that's a negative sign
for sure when the entire body of the red candle swallows up or covers the entire
body of the green candle yeah that's that's a bad sign or a good sign if
you're shorting the stock but it's a bad sign if you're long and then the bullish
engulfing is the opposite a bullish engulfing pattern forms when the green
body of the second candle fully engulfs or covers the entire previous red
candles body and when it's at the bottom of a downtrend that's considered a
reversal candle when you've got candlesticks going down down down and
then this happens you get a green candle where the body is so big it just fully
covers the body of the previous red candle that's oftentimes considered
bullish that's why it's called a bullish engulfing candle and you might expect
the next candle is to go upwards it doesn't work all the time but that might
be an expectation okay so let's look at that if you pull back a chart and look
at multiple candlesticks on a chart all right so here we have the bearish
engulfing you got candles going up up and up but then uh-oh look at these two
right so there's the bearish engulfing this body is bigger and it swallows up
or covers all of the previous green candles body and so you might think that
it's gonna start going down and that doesn't work all the time but sometimes
it does and this is the bullish engulfing you got the candlesticks going
down and here's the bullish engulfing pattern and you might expect the
candlesticks to start going up because the in the body of the green candle
fully engulfs the previous red candles body all right
and here are some interesting points about that yeah the body of the second
candle completely engulfs or covers the body of the first candle now people ask
about the wicks sometimes remember we talked about the wicks these two lines
here and these two lines here the wicks are not considered as important as the
bodies of the candlesticks now there's debate about that some
people say the wicks are just as important as the bodies but most of the
technicians would probably agree that with the bullish and Barry and bearish
engulfing it's mostly the bodies that you're looking at which represent the
opening and closing prices of that period okay here are some other
considerations the larger the body of the engulf 'uncle the more powerful the
reversal signal is the large body shows that the new direction has begun with
conviction all right so imagine if this body were
really really big okay that's real conviction behind the reversal and same
here with the bearish engulfing a really big long or tall I should say red body
here would indicate some serious reversal here possibly in the making
all right large volume also during the engulfing candlestick is also evidence
that the new direction has begun with conviction so if this green candlestick
bullish engulfing in the bullish engulfing pattern had a large green
volume bar below it that would indicate more conviction
perhaps a stronger uptrend if this red candle had a large red volume candle
below it then that might be an even stronger indication that the trend might
be reversing and finally if the engulfing body engulfs the body and the
shadows top and bottom you know the wicks of the previous day
that is even more evidence that the new direction has begun with conviction okay
and actually we see that here this body is
large that it actually engulfs or covers not only the body of the previous red
candle but it's even taller it's even higher and lower than the wicks okay and
when that happens that could be even more powerful all right so you're
looking for a longer body that could indicate more conviction you're looking
for more volume look for that volume bar and if it engulfed if the body and gulfs
the previous body and the wicks that's even more conviction there according to
this theory all right so I hope you enjoyed this video hope you learned
about bearish and bullish engulfing candle sticks this is just an
introduction I do help people I coach people on these things and also with
putting together a trading or investing plan because you really need to have one
if you want to be successful at this my name is David Modell if you need help
with this you can email me at David Modell at gmail.com if you like this
video please give it a thumbs up and leave a comment okay do you think this
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like this one thank you so much I really appreciate it I'll talk to you again
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