TA Lesson Of The Week: Bullish Engulfing
A bullish engulfing is often a sign of a short term trend reversal. If you see a bullish engulfing with higher than average volume, that gives more confluence to the trend reversal.

These trend reversals sometimes lead to just a day or two of green followed by more downside or can lead to a few weeks of green.

A few examples of these today include $FVRR, $U, $UPST, $TWLO, $SHOP.

All of these stocks are in steady downtrends which means stay patient on your long entries, but they are ones to watch tomorrow for continued strength.

Nathan Worden's avatar
Love the visual here— if you had a position in Twilio, Shopify, Unity or Fiver, would you be leaning towards a day or two of green followed by more downside, or a few weeks of green, and what would you look at to try and help you determine this?

Curiosity only— not financial advice of course. Always an important reminder, but especially when the market is so unforgiving right now.
Preston | Investor Insight's avatar
@nathanworden I couple bullish engulfing with other indicators so for example if the 9 or 21 EMA is continuing to act as resistance on the daily chart, then my main target would be another move up to that resistance point.

For a bottom formation, it is often 3 bullish candles back to back that causes the 9 Ema to crossover the 21 ema to the upside. Once I see this, I get a lot more confluence that the short term bottom is in and the rally can last a few weeks.

It’s too early to call for most of those names, but lots of them have gaps that were created via earnings so I look for normally a gap fill or a test of the 9EMA. If the EMA is moving into the gap, the gap often does not fill fully so my target is the 9EMA.

I tried to be as detailed and simple as possible, so I hope this is easily comprehendible.
Nathan Worden's avatar
@investorinsight Yep, very helpful! Thank you!
Joshua Simka's avatar
I find your visual very illuminating! 🕯️

Seriously though, I didn't know why it was called "gapping lower" until seeing this. Keep up the great work!