Bullish Engulfing Pattern: definition, rules and reliability

What it measures

A bullish engulfing pattern is two bars: a down bar followed by an up bar whose body fully contains the prior bar’s body — its open is below the prior close and its close is above the prior open.

It measures a one-bar reversal in control: sellers had the bar before, and buyers did not just match that move but erased it and extended past it within a single bar.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Bar one closes below its open (a down bar).

2. 2

   Bar two opens at or below bar one’s close and closes at or above bar one’s open.

3. 3

   The second body strictly contains the first — partial overlap does not qualify under the standard definition, though some implementations relax this.

How to read it

• The pattern is strongest after a clear decline and at a level with some prior significance — a support zone, a prior low, a round number.
• A larger second bar relative to the first, on volume clearly above average, describes real participation rather than a thin move that happened to engulf a quiet prior bar.
• An engulfing pattern in the middle of a range or a strong downtrend is much weaker evidence than the same shape at a defended level.

Where it misleads

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