A bullish engulfing candle occurs after a significant downtrend. Note that the engulfing candle must encompass the real body of the previous candle, but need not surround the shadow.
In order for the Bullish Engulfing signal to be valid, the following conditions must exist:
- The stock must have been in a definite downtrend before this signal occurs. This can be visually seen on the chart.
- The second day of the signal should be a white candle opening below the Close of the previous day and closing above the Open of the previous day’s black candle.
For example
