Engulfing Pattern

The engulfing pattern is a two-candlestick reversal pattern in Japanese candlestick charting that signals a potential change in trend direction. A bullish engulfing pattern forms at the bottom of a downtrend: the first candle is bearish (red/black), and the second candle is bullish (green/white) with a real body that completely engulfs (covers) the first candle's real body. This indicates that buyers have overwhelmed sellers in a single session, potentially marking the beginning of an uptrend. A bearish engulfing pattern forms at the top of an uptrend: the first candle is bullish, and the second candle is bearish with a body that completely engulfs the first. This shows sellers have overtaken buyers decisively. The strength of the signal depends on several factors: the size of the engulfing candle (larger bodies are more significant), the volume on the engulfing candle (higher volume adds confirmation), the preceding trend (the pattern is most meaningful after an extended move), and the location relative to support/resistance levels. For the pattern to be valid, the second candle's body must fully contain the first candle's body — the shadows (wicks) do not need to be engulfed. Engulfing patterns that occur at key technical levels (such as trendlines, moving averages, or Fibonacci retracements) carry more weight. Traders often wait for the next candle to confirm the reversal before entering a trade.