All elements are in place, and the bullish engulfing formation is formed. Investors recognize this pattern and use this opportunity to capitalize on the imminent change in the trend direction. The price action then pushes higher to record two swing highs, and ends up in ultimately trading at higher levels.
In this particular example, we see the power of a bullish engulfing pattern. The trend reversed after the second candle generated a signal that the bulls have taken control over the price action, and the downtrend may be finished.
How to trade the bearish engulfing pattern
The second example that we show here is a great opportunity to see the engulfing pattern at its best. The USD/CAD price is trading lower on a daily chart. At one point, the price rebounds strongly before it reverses again to continue trading lower, and ultimately printing the new short-term low.
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