Detecting Bullish and Bearish Engulfing Candlestick Bodies
Summary
The document presents a directional rule for identifying engulfing candlestick patterns using candle bodies rather than the full high-low ranges. A bullish signal requires the prior candle to close below its open, the current candle to close above its open, and the current body to span beyond both boundaries of the prior body. The bearish rule reverses those conditions. The indicator returns a positive value for bullish engulfing, a negative value for bearish engulfing, and zero otherwise.
The author frames this as an alternative interpretation of an earlier detection method and cites a candlestick reference as support for focusing on bodies. No market, timeframe, trading entry or exit rule, or empirical test is supplied. The pattern detector therefore defines a technical signal, but the document does not show that the signal predicts returns or explain how to manage trades built around it.
Key ideas
- The detector compares candle bodies rather than their full high-low ranges.
- A bullish engulfing signal requires a bearish prior candle and a bullish current body spanning the prior body.
- A bearish signal applies the inverse candle directions and body boundaries.
- The output distinguishes bullish, bearish, and absent patterns with three values.
- No backtest or evidence of predictive performance is provided.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.