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Engulfing Pattern

An engulfing pattern is a reversal candlestick pattern that can be bearish or bullish depending upon whether it appears at the end of an uptrend or downtrend.

It is formed by two candles, where the body of the first candle is “engulfed” by the body of the second candle. It provides an approach for traders to enter the market in anticipation of a possible trend reversal.

The pattern formation consists of two candles.

The first candle is characterized by a small body, followed by a taller candle whose body completely engulfs the previous candle’s body.

Engulfing candle

There are two types of engulfing candlestick e patterns:

  1. Bullish Engulfing pattern
  2. Bearish Engulfing pattern

The Bullish Engulfing pattern provides the strongest signal when appearing at the bottom of a downtrend and indicates a surge in buying pressure.

The bullish engulfing pattern often triggers a reversal of an existing trend as more buyers enter the market and drive prices up further.

The pattern involves two candles with the second candle completely engulfing the body of the first candle.

bullish engulfing example

The Bearish Engulfing pattern is simply the opposite of the Bearish Engulfing pattern. It provides the strongest signal when appearing at the top of an uptrend and indicates a surge in selling pressure.

The Bearish Engulfing pattern often triggers a reversal of an existing trend as more sellers enter the market and drive prices down further.

The pattern involves two candles with the second candle completely engulfing the body of the first candle.

bearish engulfing example

Traders can look to trade engulfing patterns by waiting for confirmation of the move. This is done by observing price action after the pattern has formed and seeing if the price continues in the expected direction.

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