Section 3 · Chart Reading
Engulfing Patterns
When one candle swallows the previous entirely
The Complete Takeover
An engulfing pattern is a two-candle setup where the second candle's body completely contains the first candle's body. A bullish engulfing forms at the bottom of a downtrend: the first candle is a small red (bearish) candle, and the second is a large green (bullish) candle whose body fully engulfs the red one. This signals that buyers overwhelmed sellers in a single session. A bearish engulfing forms at the top of an uptrend: a small green candle is followed by a large red candle that swallows it whole. Engulfing patterns work because they represent a complete sentiment reversal in just two sessions. The larger the second candle relative to the first, and the higher the volume on the second candle, the more powerful the signal. Many traders consider engulfing patterns among the most reliable reversal signals in candlestick analysis.
3 things to know
Bullish engulfing: large green candle fully contains the prior small red candle
Bearish engulfing: large red candle fully contains the prior small green candle
Higher volume on the engulfing candle dramatically increases signal reliability
Dive Deeper
Bullish Engulfing Signal
Small red candle followed by a large green candle that swallows it — buyers took complete control. Best at the bottom of a downtrend near support.
Bearish Engulfing Signal
Small green candle followed by a large red candle that swallows it — sellers took complete control. Best at the top of an uptrend near resistance.
Confirmation Matters
Wait for the next candle to confirm. High volume on the engulfing candle and a follow-through candle in the same direction significantly improve reliability.
Key vocabulary — tap each card
Practice
Engulfing Patterns: True or False?
Statement 1 of 4
A bullish engulfing pattern appears at the top of an uptrend.
Did you know?
Pro tip: the best engulfing patterns occur when the second candle not only engulfs the first but also closes above (bullish) or below (bearish) a key moving average — combining pattern and indicator confirmation in a single candle.