Bullish Engulfing:

The Bullish Engulfing is a two-day pattern. The first day is a short, Black Candle. The second day is a longer White Candle. The White Candle body must engulf the Black Candle body. That means an Open lower than the Black Candle Close and a Close higher than the Black Candle Open. High volume on the second day would be preferred.

A Bullish Engulfing Pattern should always be confirmed on the third day by a White candle that closes above the second day White Candle. A gap up is even better.

Three Outside Up:

When a Bullish Engulfing pattern is confirmed on the third day by a White candle that closes above the second day White Candle. This then becomes a Three Outside Up Pattern.

The significance of this pattern is that the Bears are losing strength and the Bulls are getting back in. The second white candle on day three gives further indication of that fact. A White Candle on day four with a higher close would further confirm the pattern.

Remember that the Bullish Three Outside Up pattern is known as a reversal pattern. In other words, it is more significant when it appears after a downtrend.

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