How do you trade the bullish engulfing pattern?

Discussion in 'Technical Analysis' started by levalencia, Dec 28, 2012.

  1. I have read a lot about this pattern, in steve nison and steve bigalow books, however they dont explain when to enter or exit the trade after the pattern is present.

    How do you enter and exit when you see this pattern?
    I am a swig trader, but does this also applies to lower time frames? 30 min, 15 min, 5 min, 1min charts?
  2. I've never used a pattern like this, but after looking up what it was, I think you might find EMA's helpful as an entry point. Since the engulfing pattern sometimes takes up a good chunk of the trend, a minor counter-trend would take the price back to an EMA before continuing.
  3. I'm going to take a crack at this. Example symbol ARCO this stock made a bullish engulfing pattern. Take the previous days low which was 11.76 go 1.0% below that which is about 11.65 that is your stop price. Now for the enter price. Use the previous high on the latest day. Example ARCO that day was actually the previous day at 12.07. But in the case of FDO it was the day 12-24 of a high at 63.35 more than just the previous day, it would be higher, high than the day of your engulfing candle. So basically you would go long ARCO on mon.31 at about 12.08 stop at 11.65 and a target at 2.0%-2.5% or 12.32-12.38. It's hard to explain but pull up the charts of these two stocks and you'll get the idea. The targets are small but that is the average range of the pivot. Just buy enough shares that if it does hit the 2% you will at least capture a hundred dollar bill.
  4. FWIW:
    1) Is it also known as a "Key Upside Reversal" or "KR+" in charting parlance? :confused:
    2) The likelihood of the pattern occuring is higher if the preceding bar, in whatever time frame you're using, is "narrow". :eek:
    3) Ideally, the current bar you're looking at will "substantially" get below the low of the previous bar and then reverse/rally through that same low price to create the pattern within the time interval you're looking at. :cool:
    4) Instead of waiting for the pattern to trace itself out and THEN trading it, try to anticipate it with a buy-stop on the reversal through the low of the previous bar to higher territory. Your protective-stop can be at the low of the current bar. :)