One thing I noticed about the engulfing bullish pattern, one of the commonly encountered formations in technical analysis. This formation is one of the quite strong signals that can indicate the market trend has reversed.

To explain what the engulfing bullish pattern is, it actually consists of a combination of two candles. The first candle shows a decline, while the second candle (green or white) completely engulfs this decline and closes upward. The critical point here is that the body of the second candle should be wider than the first. This is how the engulfing bullish pattern is formed.

There are some conditions for this pattern to be considered valid. First, there must be a clear downtrend before the pattern. If this pattern appears in a random market, it may not have the same strength. Second, the green candle must completely cover the previous red candle. And of course, this green candle should show a strong close.

When I look at the hourly chart of XAUUSD, I can see an example exactly like this. The engulfing bullish pattern that appears after a downtrend has clearly engulfed the previous four-hour candle. The chart clearly signals this.

In technical analysis, trend reversal usually does not start with just a single pattern. Patterns like the hammer and inverted hammer, when seen together with the engulfing bullish pattern, can create more reliable signals. Such combinations provide stronger evidence that the market has truly reversed.