Technical Analysis
Engulfing Candle
A two-candle reversal pattern where the second candle's body completely engulfs the first — bullish engulfing signals reversal up, bearish engulfing signals reversal down.
Key rules
- Second candle body must completely cover the first candle body
- Most reliable at key support/resistance, swing highs/lows
- Higher volume on the engulfing candle strengthens the signal
- A gap open on the engulfing candle adds confirmation
- Fails if price breaks back into the prior candle's territory quickly
An engulfing candle is a two-candle reversal pattern that occurs when the second candle's body completely engulfs the body of the first candle. It signals a decisive shift in sentiment.
**Bullish Engulfing** Occurs at the bottom of a downtrend. A bearish (red/down) candle is followed by a bullish (green/up) candle whose body completely covers the previous candle's body. This indicates buyers overwhelmed sellers and seized control.
**Bearish Engulfing** Occurs at the top of an uptrend. A bullish candle is followed by a bearish candle that completely engulfs it. Sellers have overwhelmed buyers.
**Strength Factors** - The larger the engulfing candle relative to the prior candle, the stronger the signal - Appearing at a key support or resistance level significantly increases reliability - High volume on the engulfing candle is a strong confirmation - A gap at the open of the engulfing candle adds to the signal strength