Engulfing

An engulfing pattern is a two-candle reversal pattern which is made up of a short candlestick followed by a longer candlestick whose high is above the first candle’s high and whose low is below the low of the first candle. In essence, the second candle completely engulfs the first candlestick.

The engulfing pattern has bullish and bearish varieties. In the bullish engulfing candlestick pattern, the smaller Day 1 candle is shorter while the longer, engulfing candlestick is bullish.

Bullish Engulfing pattern

In the bearish engulfing candlestick pattern, the smaller Day 1 candle is bullish while the longer Day 2 candle is bearish. The bullish engulfing pattern is used as a reversal pattern when it occurs in a downtrend while the bearish engulfing pattern is used as a reversal signal to the downside when it occurs in an uptrend. The bearish engulfing pattern is shown below:

Bearinsh Engulfing pattern