Engulfing pattern
An engulfing pattern is a reversal pattern built from two candles on a where the body of the second candle completely covers, or engulfs, the body of the first candle. A bullish engulfing pattern forms after a , when a red candle is followed by a larger green candle whose body opens below the prior close and closes above the prior open. A bearish engulfing pattern forms after an , when a green candle is followed by a larger red candle whose body opens above the prior close and closes below the prior open.
The pattern signals a sudden and forceful shift in control between buyers and sellers within the space of a single session. In a bullish engulfing pattern, sellers had been in charge during the first candle, but buyers then take over so completely on the second candle that they erase the entire prior session's move and push further, which is read as evidence of strong buying pressure overwhelming the prior trend. A bearish engulfing pattern shows the same dynamic in reverse, with sellers abruptly overwhelming a trend that had been controlled by buyers.
The reliability of an engulfing pattern is generally considered stronger when the second candle's body is much larger than the first, when it forms after an extended prior trend rather than a brief one, and when it occurs on higher than , all of which suggest the reversal in sentiment is backed by real conviction rather than a single thinly traded session.