In technical analysis, the Engulfing patterns are formed by two candles, where the body of the first candle is “engulfed” by the body of the second candle.
These patterns provide an approach for traders to enter the market before a possible trend reversal. An engulfing pattern is a reversal candlestick pattern that can be bearish or bullish, depending on whether it forms at the end of an uptrend or downtrend.
The pattern consists of two candles. The first one is characterized by a short body, followed by a taller candle whose body completely engulfs the previous candle’s body.
The Bullish Engulfing provides the strongest signal when appearing at the bottom of a downtrend and indicates an increase in buying pressure. It often triggers a reversal of an existing trend, meaning that more and more buyers are entering the market, driving prices up further. The pattern involves two candles with the second one completely engulfing the body of the first one.
The Bearish Engulfing is the opposite of the Bearish Engulfing. It provides the strongest signal when appearing at the top of an uptrend and indicates an increase in selling pressure. It often triggers a reversal of an existing trend, meaning that more and more sellers are entering the market and driving prices down further.
The pattern involves two candles with the second one completely engulfing the body of the first one.