A candlestick pattern on a price chart forms when a small-bodied candle is followed by a larger candle whose body completely engulfs the first. In this configuration, the engulfing candle's body covers the entire body of the preceding candle, which can indicate a shift in price action from buyers to sellers and a potential move lower.
The pattern typically appears after an uptrend, suggesting momentum may be shifting and price could move to lower levels. Analysts often look for the engulfing candle to close within or beyond the prior candle’s body, and may seek additional confirmation from volume or other indicators such as momentum measures. Because the pattern can occur in varying market conditions, technicians emphasize context: its location on the chart, surrounding price action, and whether subsequent candles follow through.
Engulfing patterns are not guarantees and can produce false signals, especially when observed in isolation. Reliability improves when the pattern aligns with the overall trend, occurs at key support or resistance levels, or is confirmed by other signals (for example, a follow-up price move).
On a daily chart, a small-bodied up-day is followed by a larger day that engulfs the prior day’s body, and the second day closes below the first day’s open.
Candlestick chart · Engulfing pattern · Doji · Morning star · Evening star · Support and resistance