Strong Bullish Engulfing signal deserves strong attention
A Bullish Engulfing signal formation after a downtrend with stochastics in oversold condition, makes for a strong buy scenario. The signal is one of the major candlestick reversal signals and has been extensively studied for a long time. To be a true signal, the bullish candle on the second day needs to completely enclose the prior day's body. But here is the icing on the cake....if the bullish candle engulfs more than one of the preceding bearish candles, the signal is that much more powerful. It shows how much the bulls have managed to wrest control. If this candlestick signal appears at a technically significant level, traders should not miss profiting from such a high probability trade.
Consider the chart of BHARATFORG below. The stock formed a Bullish Engulfing signal which not only encompassed the prior day's body and shadows, but also three prior bodies. The bulls were confident and weren't afraid to show it. The other important part of the scenario was that the bullish candle broke the perceived downtrend. Probabilities were extremely high at this point that the stock would head higher.
Chart courtesy icharts.in