Engulfing

The Engulfing pattern is a common candlestick pattern in technical analysis that signals potential reversals in the market. It consists of two candlesticks and can be either bullish or bearish.

Bullish Engulfing Pattern

This occurs at the end of a downtrend. The first candle is a small bearish (red or black) candle, followed by a larger bullish (green or white) candle. The second candle's body "engulfs" the first candle's body. This pattern suggests that buyers have overcome the sellers and a trend reversal to the upside might be underway.

Bearish Engulfing Pattern

This occurs at the end of an uptrend. The first candle is a small bullish (green or white) candle, followed by a larger bearish (red or black) candle. The second candle's body "engulfs" the first candle's body. This pattern suggests that sellers have taken control from the buyers and a trend reversal to the downside might be underway.

In both cases, the second candlestick "engulfs" the body of the first one, but it does not need to cover the shadows (or wicks) of the first candlestick. The Engulfing pattern is considered more reliable when it appears after a mature trend and is confirmed by other indicators. As always, it's best to use this pattern in conjunction with other forms of technical analysis to validate its signals.