WEBVTT 0 00:09.410 --> 00:17.150 We have seen single candle patterns like the hammer and the Shooting Star. Single candles can give important 1 00:17.150 --> 00:24.230 information about supply and demand simply through the colour, the length of the real body and the length 2 00:24.440 --> 00:26.240 of the shadows. 3 00:26.240 --> 00:33.920 Now we're going to analyze combinations of individual candles. The engulfing pattern is a major reversal 4 00:33.920 --> 00:37.640 signal with two opposite colour real bodies. 5 00:37.910 --> 00:41.760 In this lecture we are focusing on the bullish engulfing pattern, 6 00:41.930 --> 00:48.590 so let's have a look at the properties. As I have already said it is a two candle pattern. 7 00:48.860 --> 00:52.110 The market then must be in a downtrend. 8 00:52.130 --> 00:58.430 This is the most important condition and this time is not the last one because we need it to understand 9 00:58.430 --> 01:00.280 the other conditions. 10 01:00.320 --> 01:05.870 So the first candle must be red, in line with the previous trend that is down. 11 01:06.140 --> 01:08.760 The second candle must be green, 12 01:08.760 --> 01:16.580 with a real body that surrounds, or we can say engulfs the real body of the first. 13 01:16.580 --> 01:21.510 Last one, the position of the shadows on either candles doesn't matter. 14 01:21.680 --> 01:24.320 What's the logic behind this pattern? 15 01:24.680 --> 01:30.080 We have a first candle that is confirming that sellers are in control of the markets. 16 01:30.080 --> 01:35.410 Traders are expecting then and another red candle, in line with the downtrend. 17 01:35.570 --> 01:37.090 But here it comes a long 18 01:37.100 --> 01:46.370 green candle that engulfs the previous one, showing that buying pressure has overwhelmed selling pressure. 19 01:46.370 --> 01:53.450 Here we have United States dollar Japanese yen on a hourly chart and you can see that the price is going 20 01:53.450 --> 01:54.030 down. 21 01:54.170 --> 01:57.850 So sellers are in control in the first part of the chart. 22 01:58.280 --> 02:02.500 At the end of this downtrend there's a bullish engulfing pattern. 23 02:02.600 --> 02:09.440 So analyzing the price action on the market, we can say that sellers were in control and they pushed 24 02:09.440 --> 02:15.440 the price down for a long time without facing any major resistance by the buyers. 25 02:15.440 --> 02:21.650 At one point, we can see a bullish engulfing pattern that is basically telling us that buyers 26 02:21.650 --> 02:25.820 had a strong reaction compared to the previous session. 27 02:26.210 --> 02:32.990 So the bullish engulfing pattern is a clear signal that the demand increased maybe because the price 28 02:32.990 --> 02:36.930 is too low and buyers find convenient to buy. 29 02:37.460 --> 02:40.370 Now that you know the bullish engulfing pattern, 30 02:40.550 --> 02:47.800 can you imagine how the bearish engulfing pattern is? We'll see it in the next lecture.