A black day is completely “engulfed” by a large white day that
gaps below the black day’s low and rallies to close above its high.
In a downtrend or within a pullback of an uptrend, the gap down may be
the blow out that causes the bulls to throw in the towel. When selling
abates, bottom fishers and shorts rally the stock to close above the previous
day’s high. The bullish Engulfing pattern is very common…literally
dozens occur every day and many are just incidental. Watch volume for
The bullish Engulfing is similar to the bullish Piercing Line and could
be the first two days of the bullish Three Outside Up.