Forecast Uptrends with the Bullish Engulfing Signal

Alert Forex traders gain profits at market turnarounds. With this in mind we consider how to forecast uptrends with the Bullish Engulfing Signal. The Bullish Engulfing Signal is a Japanese candlestick pattern that alerts traders to a positive change in market sentiment. It is a useful and profitable way to follow foreign currency rates.

What is a Japanese Candlestick Signal?

First of all a Japanese candlestick is a pictorial representation of the price of a stock, commodity, or foreign currency over the course of a trading day or other defined period of time. The candle is a rectangle superimposed on a chart. It defines the opening and closing price by its position and by being white for an up day and black for a down day. The candle has wicks or shadows extending above and below. These represent the total trading range for the day in question. A signal in Japanese candlesticks is one or more candlesticks. Because trading patterns repeat themselves they can be predictive of price changes in the market such as being able to forecast uptrends with the bullish engulfing signal. It is possible to profit by trading Forex with candlesticks. One simply needs to learn to use the system.

What Is the Bullish Engulfing Signal?

The Bullish Engulfing Signal is a pair of candlesticks. It occurs at the end of a defined downtrend in the market. The first of the candles is the last of the downtrend, a black candle. The second candle of the pair is a white candle as the trading day ends higher than it started. The second candle extends lower than the first and higher as well. This means that the stock in question gaps down at the start of trading but that a strong market move takes the stock price above the opening price of the previous day. To accurately forecast uptrends with the Bullish Engulfing Signal the downtrend needs to have been well defined. If the second candle in the signal extends above and below the shadows of the first it is an especially strong indication of the market moving up.

What Does This Signal Mean?

A Bullish Engulfing Signal tells us that a downward or bear market has probably run out of steam. There is a good chance that fundamentals are supporting a bottom to the bear market. This trend may well have reached a resistance level. Or new fundamentals have come into the picture and indicate a more promising stock price in the future. No matter what the case it is possible to forecast uptrends with the Bullish Engulfing Signal simply based on the reading of a change in market sentiment. There are two virtues of using candlestick signals. One is that they are clear and easy to read so that they function to give the trader a heads up as to coming market action. The other is that they accurately display evolving market sentiment. Smart traders will always double check, consult the fundamentals, and watch as further market action unfolds. However, it can be profitable to forecast uptrends with the Bullish Engulfing Signal in Japanese candlestick trading.

Note: When reading a Bullish Engulfing Signal beware of the Doji. This is a very flat candlestick that has its own meaning. Because the Doji as virtually flat the next candle almost always “engulfs” it. It is also possible to anticipate a Forex market reversal with the Doji signal. But, if the first candle in the sequence is a Doji do not read this and a Bullish Engulfing Signal!