Engulfing Pattern

A engulfing pattern is a technical chart pattern that can be bearish or bullish.

Bearish Engulfing Pattern occurs in the market which is in a clearly defined uptrend and signals lower prices to come. The pattern consists of an up (white or green) candlestick followed by a large down (black or red) candlestick that engulfs the previous up candle’s body. It is a bearish reversal pattern and sends an even stronger signal when the down candle engulfs the bodies of two or three previous candles. It shows sellers have overtaken the buyers and pushed the price down more aggressively than the buyers were able to push it up.

Bullish Engulfing Pattern occurs in the market which is in a clearly defined downtrend and signals higher prices to come. The pattern consists of a small down (black or red) candlestick followed the next day by a large up (white or green) candlestick that engulfs the previous down candle’s body. It is a bullish reversal pattern and sends an even stronger signal when the up candle engulfs the bodies of two or three previous candles. It shows buyers have overtaken the sellers and pushed the price up more aggressively than the sellers were able to push it down.