Engulfing Patterns
Overview
A bullish engulfing pattern occurs when a large green candle completely engulfs the prior red candle near the bottom of a trend. A bearish engulfing is the opposite — a large red candle swallows the prior green candle at the top. Engulfing patterns are among the most reliable two-candle reversal signals.
Key Concepts
The second candle's body must completely engulf the first candle's body, Volume should be higher on the engulfing candle, Location matters (support/resistance zones), Three-candle inside bar variants
Entry Signals
Bullish engulfing at a support level or demand zone, Bearish engulfing at resistance or supply zone, Volume significantly higher than recent average, Prior trend of at least 5 candles
Exit Signals
Stop below the engulfing candle's low (bullish) or above its high (bearish), Target 1:2 risk-reward minimum, Trail stops using subsequent swing lows/highs
Best Timeframes
1H+ timeframes, with Daily and Weekly being most authoritative
Pro Tips
Engulfing patterns that also break a key moving average add significant confluence. Check RSI for divergence to strengthen the signal.
More Topics in This Category
Marubozu
A marubozu is a candle with no wicks (or very small wicks) — the open and close are at the extreme ends. A bullish marubozu opens at low, closes at high. A bearish marubozu opens at high, closes at low. Marubozus represent maximum conviction and can signal the start of a strong momentum move.
Harami Patterns
A harami (Japanese for 'pregnant') is a two-candle pattern where a small candle is completely contained within the prior candle's body. A bullish harami appears in downtrends; a bearish harami in uptrends. Haramis signal fading momentum but require confirmation before trading.
Continuation Triangles
While not strictly a candlestick pattern, continuation triangles (ascending, descending, symmetrical) are multi-candle patterns where price contracts between converging trendlines. Breakouts from triangles tend to continue the prior trend. Triangles are measured-move patterns — the target equals the height of the triangle projected from the breakout point.
Tweezer Tops & Bottoms
Tweezers are two-candle patterns where both candles test the same high (tweezer top) or low (tweezer bottom). The first candle extends the trend and the second candle reverses. The matching highs/lows create a visual 'tweezers' shape indicating a rejection level.