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
shadows. Below you will find an illustration of a bullish engulfing candle:



A bearish engulfing candle occurs after a significant uptrend. Again, the shadows need
not be surrounded. Below you will find an illustration of a bearish engulfing candle:
The power of the engulfing candle is increased by two factors -- the size of the candle
and the volume on the day it occurs. The bigger the engulfing candle, the more



significant it is likely to be. A large bullish engulfing candle says the bulls have seized
control of the market after a downtrend. Meanwhile, a large bearish engulfing says the
bears have taken command after an uptrend. Also, if volume is above normal on the day
when the signal is given, this increases the power of the message.