Overview of Dual Candlestick Patterns
Bullish Engulfing Candles
A bullish engulfing candle is a dual candlestick pattern, which might signal an upcoming uptrend. The pattern applies after there's been a period of consolidation or downtrend.
The two-candlestick pattern is a bearish candle followed by a larger bullish candle. The reason this is an indicator for an uptrend is that bulls are showing more strength than bears. The change in strength with the bulls shows a reversal of momentum that will likely continue into the future.
The name of the pattern comes from the idea that the bullish candle "engulfs" the bearish candle that came before it.
Bearish Engulfing Candles
The bearish engulfing pattern is similar to the bullish engulfing patterns but signals an upcoming downtrend instead.
One difference between bearish and bullish engulfing patterns is that a larger bearish candle follows a smaller bullish candle instead. The reason for this reversal is that bears have started to out strengthen the bulls and the momentum might continue into the future.
Tweezer Bottoms and Tops
Tweezer bottoms and tops are another type of dual candlestick pattern, which signal a reversal after an extended uptrend or downtrend.
A tweezer bottom follows an extended downtrend and signals a reversal upwards. The first candlestick for a tweezer bottom has a bearish candle with a moderately length shadow below. The second candlestick is a bullish candlestick with an equal length body and shadow sharing the same low as the first candle.
A tweezer top is the opposite of a tweezer bottom as it follows an extended uptrend and signals a reversal downwards. The tweezer top pattern has a bullish candle with a shadow on top, and a bearish candle with a shadow on top following it. Similar to the tweezer bottom, the bodies and shadows must share the same high, low, open and close.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.