ENGULFING

The Engulfing candlestick is a pattern that involves two candles and can signal a reversal in the trend.

The Engulfing candlestick pattern is a two-candle pattern that can signal a reversal in the current trend. It occurs when a small candlestick is completely engulfed by a larger candlestick that follows it, suggesting a possible shift in market sentiment.

In simple terms, engulfing means cover or eat completely. Here the second candle completely covers or "eats up" the first candle. So the name Engulfing Candles.

There are two types of Engulfing patterns

  1. Bullish Engulfing

    The bullish engulfing candle indicates reversal of a downtrend.

    It happens when there are two candles: a red one first, and then a green one that completely covers the red one. This indicates that there's been an increase in buying pressure and that the price might start going up.

    • The bullish engulfing candle typically appears at the bottom of a downtrend.
    • The pattern involves two candles, with the first one being red and the second one being green and larger in size.
    • The bullish engulfing candle indicates a bullish reversal, meaning the price might start going up.
    • The bullish engulfing candle's low or close can be considered as a support line.
    • Traders can use the bullish engulfing candle as a signal to exit their short position, as the current ongoing trend that is going to an end.
    • However, the pattern fails if a new low is achieved after the second candle.
    • The bullish engulfing candle doesn't provide any specific target, but it suggests that traders are interested in going opposite to the downtrend, which could mean that a trend reversal might occur.

  2. Bearish Engulfing

    The Bearish engulfing candle indicates reversal of a uptrend.

    It happens when there are two candles: a green one first, and then a red one that completely covers the green one. This indicates that there's been an increase in selling pressure and that the price might start going to fall off.

    • The bearish engulfing candle typically appears at the top of a uptrend.
    • The pattern involves two candles, with the first one being green and the second one being red and larger in size.
    • The bearish engulfing candle indicates a bearish reversal, meaning the price might start fall down.
    • The bearish engulfing candle's high or close can be considered as a resistance line.
    • Traders can use the bearish engulfing candle as a signal to exit their long position, as the current ongoing trend that is going to an end.
    • The pattern fails if a new High is achieved after the second candle.
    • The bearish engulfing candle doesn't provide any specific target, but it suggests that traders are interested in going opposite to the uptrend, which could mean that a trend reversal might occur.

The interpretation of an engulfing candlestick pattern can be ambiguous, as there is no clear guidance on how many candles should be considered in the pattern and what their relative sizes should be.

Engulfing patterns may not be suitable for all trading styles, as they require a more patient and longer-term approach to trading, which may not be suitable for those who prefer to trade more frequently or use shorter-term trading strategies.

Example-1 : Bullish Engulfing

Example-2 : Bullish Engulfing and false candle

Example-3 : Almost Bullish Engulfing pattern

Example-4 : Bearish Engulfing

Example-5 : Bearish Engulfing with confirmation

Example-6 : Bullish Engulfing making reversal of trend

Example-7 : Bearish Engulfing with Hammer candle

Example-8 : Bullish Engulfing with stop loss and entry point

Example-9 : Formation of Bullish Engulfing near support zone

Example-10 : Formation of Bullish Engulfing on the trend line

Example-11 : Bullish Engulfing and Bearish Engulfing



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