A failing bullish engulfing pattern

Figure 7-3 is an example of what happens when good bullish engulfing patterns go bad, using the Euro currency futures contracts to show the price action when the setup day's low is violated a few days after the pattern arises.

The setup day in this example is very encouraging. There's a definite downtrend, and all the other bullish engulfing pattern criteria check out. But things sour quickly. The bulls lose the fight, and the result is a very bearish day. No matter what you choose to be your failure level, this day should be when you throw in the towel.

As I was compiling real-world examples for this book, I had an extremely tough time finding a bullish engulfing pattern that didn't work out profitably if it was correctly traded. Bullish engulfing patterns don't always work, but finding one is an exciting prospect, and the chances are very good that if you trade on it wisely, the result will be bright.

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