Lesson 4 of 8 · Candles & Chart Patterns
Engulfing
One candle swallows the last one.
An engulfing pattern is two candles where the second body completely covers the first. A bullish engulfing forms after a downtrend: a red candle followed by a larger green one that opens below and closes above the prior candle's open, so its body covers the prior body.
Bullish engulfing in context.
The BULLISH ENGULFING label marks the setup. The green body is clearly larger than the red one before it. Size matters: a barely-bigger green candle is weak. A dominant candle that swallows a big red one shows real conviction at that level.
Bearish engulfing works the same way, inverted.
A bearish engulfing forms after an uptrend: a green candle, then a larger red one that opens above and closes below the prior candle's open, so its body covers the prior body. The pattern carries more weight at resistance and on above-average volume. In the middle of a range, it's much weaker.
A bullish engulfing appears after a pullback. What happens next?
Reveal what happened
It went up. Price continued higher after the BULLISH ENGULFING, which is the most common outcome when the pattern forms at support on strong volume. False signals happen too, especially when the broader trend is still down or volume is light.
A large green candle completely covers the prior red candle near support. What is this and what does it suggest?
Show the answer
A. Bullish engulfing, potential reversal up. A larger green candle covering a red one near support is a classic bullish engulfing. It shows buyers overwhelmed sellers at a meaningful level.