What Is an Engulfing Pattern?
An engulfing pattern is a two-candle reversal pattern in which the second candle's body completely "engulfs" (is larger than and contains) the first candle's body. A bullish engulfing occurs at the bottom of a downtrend; a bearish engulfing occurs at the top of an uptrend.
How the Engulfing Pattern Works
Bullish Engulfing: A small red candle is followed by a larger green candle that opens below the previous close and closes above the previous open. This shows buyers overwhelmed sellers.
Bearish Engulfing: A small green candle is followed by a larger red candle that opens above the previous close and closes below the previous open. This shows sellers overwhelmed buyers.
Why It Matters for Traders
Engulfing patterns are among the most reliable single-pattern reversal signals, especially when they occur at significant support/resistance levels with above-average volume. In crypto, engulfing patterns on the 4H and daily timeframes frequently mark local tops and bottoms.
