The pair of European currencies Euro and British Pound (EURGBP) has been moving in a downtrend since the beginning of this year.

  • bearish engulfment on the daily chart
  • two ways to trade the set-up
EURGBP – bearish engulfing may herald the end of a correction

At the beginning of April, a correction of the earlier declines emerged and trading has recovered 250p from this year’s minimum. Friday’s daily candle turned out to be sharply downward and by forming a bullish engulf it signals the end of the upward correction and a return to the declines that began back in December 2020.

How to trade the bullish breakout?

This can be done in two ways – aggressive or safe.
Aggressive trading involves opening a sell order without waiting for a confirmed breakout from the pattern. It is opened when the price reaches the average EMA144 on m15. In this case the SL will be located above the maximum of the candle forming the bullish breakout.

 

EURGBP M15 – price has reached the EMA144 – signal to sell according to the EMA144 strategy

Safe version is to wait for daily candle close (see Daily chart) below the minimum of “mother” candle – 0.8655 and MACD changing to downward (red), then SL is placed above the breakout candle. I have chosen the aggressive version – i.e. entry near the EMA144 on M15 – earlier this average fulfilled the conditions for the EMA144 strategy based on this average.

I also encourage you to read an article about these formations posted on our portal: Price Action Formations – Bearish Engulfing.

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