A candlestick chart pattern formed by two candles: the first has a smaller body and the second has a larger body that fully engulfs the first. The engulfing action indicates a shift in the trading session's balance between buyers and sellers and is commonly viewed as a signal that the next price move could differ from the preceding session.
Traders use this pattern as part of price action analysis to assess whether a change in direction may be underway. It is most notable when appearing after a price decline or during a downtrend, especially if the second candle closes above the first candle's body and the volume is higher than average. In practice, it is considered more reliable when supported by other confirmations, such as longer downtrends, other chart patterns, or momentum indicators.
Like all chart patterns, it is not a guaranteed predictor. The pattern's strength depends on context, trend, and volume. Analysts often look for additional signals before acting, such as subsequent candles that confirm the move or broader trend conditions.
On a daily chart, a small down-day is followed by a larger up-day whose body completely engulfs the previous day's body.
Candlestick chart · Engulfing pattern · Two-candle pattern · Volume analysis · Price action · Reversal pattern