Candlestick patterns
Engulfing patterns
3 min
An engulfing pattern is a powerful two-candle reversal signal in which the second candle's body completely engulfs the first candle's body.
The two types
- Bullish engulfing — after a downtrend, a small bearish (down) candle is followed by a large bullish (up) candle whose body swallows it entirely. Buyers have overwhelmed sellers.
- Bearish engulfing — after an uptrend, a small bullish candle is followed by a large bearish candle that engulfs it. Sellers have taken over.
Why it carries weight
The engulfing candle shows a decisive shift of control within a single period — the new side did not just win, it more than reversed the entire prior candle. The larger the engulfing body relative to what it swallows, the stronger the signal.
How to use it and the limitation
- Entry — typically as or just after the engulfing candle closes, in its direction.
- Stop — beyond the extreme of the pattern.
The limitation: an engulfing pattern in the middle of a range is far weaker than one at a clear support or resistance level after an extended trend. As ever, context and location turn a textbook shape into an actual edge — the same two candles mid-range are just noise.
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