|Candlestick patterns are used by a variety of technical traders. Thursday's price action in all the major US equity indexes formed what is referred to as a bullish engulfing pattern. Although it would be unwise to make trading decisions based solely on the presence of a candlestick formation, this particular formation is thought to be a harbinger of a rise in prices just as the name would suggest.|
|FIGURE 1: QQQQ, DAILY. Note the engulfing pattern circled in red.|
|Graphic provided by: StockCharts.com.|
|The bullish engulfing pattern is formed when a down day is "engulfed" completely, as in the following day's price action. In this particular case, Wednesday November 12 was a down day (Figure 1). On November 13 the QQQQs closed well above the previous day's high. In addition, the low of the day was significantly lower than the low of the day before. The engulfing pattern is circled in red.|
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