Engulfing pattern

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    Engulfing patternAn engulfing pattern is a Japanese candlestick pattern that usually indicates a reversal move.

    There are two types of engulfing patterns: bullish and bearish.

    Bullish engulfing pattern

    A bullish engulfing pattern (1) usually indicates a reversal to the upside. It is formed by a bearish candle that is immediately followed by a larger bullish candle. The bullish candle closes above the previous bearish candle and gives the appearance of engulfing it. It shows that the buyers overpowered the sellers and that the market sentiment has changed to the upside (as indicated by the chart below).

    Engulfing bullish chart pattern

    Bearish engulfing pattern

    A bearish engulfing pattern (1) usually indicates a strong reversal to the downside. It is formed by a bullish candle that is immediately followed by a larger bearish candle. The bearish candle closes below the previous bullish candle and gives the appearance of engulfing it. It means that the sellers overpowered the buyers and the market sentiment has changed to the downside (as indicated by the chart below).

    Engulfing bearish chart pattern