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Engulfing Candlestick Patterns

Engulfing Patterns


Three River Evening Three River Morning
Bearish Three Gaps Bullish Three Gaps
Dark Cloud Cover Incomplete Dark Cloud Cover
Doji Star - Evening Position Doji Star - Morning Position
Engulfing Bullish Engulfing Bearish
Hammer/Hangman Inverted Hammer/Shooring Star
Bearish Harami Line Bullish Harami Line
Piercing Line Thrusting Line
Side-by-side Bearish Lines Side-by-Side Bullish Lines
Tweezers Bottoms Tweezers Tops
True Doji Lines Doji Lines
F.Tam Inside Out Up F.Tam Inside Out Down

Engulfing Bullish = Bullish Reversal - Potential Buy Signal

The Engulfing Bullish pattern is formed when a black candle is completely engulfed by a larger white candle after an extended down trend. In some cases, this pattern will form after a retracement of a bullish trend to begin another bullish rally.

The Engulfing Bullish pattern represents a complete reversal of a previous bearish trend. This type of pattern is a very common type of bottom reversal formation and is commonly found at the beginning of bullish rallies. Confirmation of this type of pattern would occur with a following session that is a white candle and closes higher with a higher high and low price.

A variation of the Engulfing Bullish pattern is the Last Engulfing Bullish pattern. This pattern looks similar to the example above and is found after an extended bullish trend. The Last Engulfing Bullish pattern represents the bulls final attempt to drive the market higher. If one is long and a Last Engulfing Bullish pattern forms, one should identify a protective stop level near the lows of the Last Engulfing Bullish pattern to protect any profit in the trade.

 Engulfing Bearish = Bearish Reversal - Potential Sell Signal

The Engulfing Bearish pattern is the reverse of the Engulfing Bullish pattern. It is formed when a white candle is completely engulfed by a larger black candle after an extended up trend. The Engulfing Bearish pattern is commonly found at market tops and at the beginning of a bearish price decline.

Again, a variation of this pattern is called the Last Engulfing Bearish pattern. This variation is commonly found after an extended down trend and represents the bears final attempt to drive the market price lower. If one is short and a Last Engulfing Bearish pattern forms, one should identify a protective stop level near the highs of the Last Engulfing Bearish pattern to protect any profit in the trade.

Western traders call this type of pattern an Outside Day because the current sessions range completely engulfed the previous sessions range.

The Engulfing Bullish and Engulfing Bearish patterns can also be found at corrections in a long-term market trend. When the market attempts to breathe by correcting from its original trend before resuming the original trend, often an Engulfing pattern will form. Investors should be aware of this formation because the market may not correct far enough for any profits to result in the trade. Investors should use a protective stop level to protect against such unwanted losses.



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