Engulfing Candlestick Pattern: What It Looks Like and What It Means
An engulfing pattern is a two-candle pattern in which the second candle's body wraps all the way around the first candle's body, and it is read as a possible reversal. It comes in two versions. A bullish engulfing hints that a fall may be turning into a rise, and a bearish engulfing hints at the opposite. Either is a clue, not a forecast.
How It Forms
A candle spans a single period of trading. It has a body, the box between its open and close, and wicks, the thin lines reaching its high and low. An engulfing needs a small body from the current trend, then a bigger one pointing the other way that wraps around it. Bullish means buyers are gaining ground; bearish means sellers are.
The drawing shows the bullish version. A falling market ends with a small red body, then the next candle opens lower and rallies to close well above where the red one began. Here are the five candles, with made-up prices:
| Candle | Open | High | Low | Close |
|---|---|---|---|---|
| 1 | $31 | $33 | $22 | $25 |
| 2 | $25 | $27 | $17 | $20 |
| 3 | $21 | $23 | $15 | $17 |
| 4 (engulfing) | $15 | $30 | $13 | $28 |
| 5 | $28 | $36 | $26 | $34 |
Candle 3's body runs from $17 to $21. Candle 4's body runs from $15 to $28, so it wraps the whole thing and reaches $7 above it.
The bearish version is the mirror image: after a rise, a down candle wraps an up candle. With made-up prices, an up candle runs from $30 to $34, then a down candle opens at $36 and closes at $28. Its body spans $28 to $36, covering the $30 to $34 body.
How to Read It
- The size. The wider the second body compared with the first, the sharper the change in control. Some readers give more weight to a candle with heavy trading volume.
- The direction. The pattern is two-sided. Which way the second body points decides whether the reading is bullish or bearish.
- The place. The pattern earns attention when a trend seems to have run its course or price reaches support and resistance levels, where earlier moves stalled.
What to Watch For
Check the lead-up first. With no clear trend before it, there is nothing to reverse, and a wrap inside a sideways stretch is mostly noise.
Three other patterns are sometimes confused with it, and each differs in shape, not position:
- A harami flips the picture. A small candle sits inside the previous large body, so the second body is the one being wrapped.
- A three outside up or down is an engulfing plus a third candle that closes in the new direction.
- A marubozu is one full-body candle with little or no wick, so it is a single candle, not a pair.
Free or Premium
Engulfing is one of the 13 core patterns, so it is free on charts and in Rapunzl's Stock Scanner. Rapunzl Premium covers the 10 extended patterns on charts, while those same patterns are free in the Stock Scanner.
Try It in Rapunzl
In Candlestick or OHLC view, Customize Chart → Chart Indicators → Levels, Patterns & AI Charts leads to the Pattern Markers toggle. With it on, the list of detected patterns under the chart includes both versions: a bullish engulfing is marked ▲ and a bearish one ▼.
The pattern appears in two filters in the Stock Scanner: Bullish candlestick and Bearish candlestick. Pick Engulfing among the patterns in each to see both versions on the latest daily candle. The idea "Bullish candlestick today" covers the bullish side. Both lists are research starting points, since candlestick patterns are hints, not promises.
A 15-Minute Class Activity
Wrap or No Wrap? Each pair needs scratch paper and a pencil. Each gets four made-up two-candle sets, open and close only. Assume a fall before Set 1 and a rise before Set 2. Set 1: day one opens $30, closes $26; day two opens $24, closes $32. Set 2: day one opens $20, closes $24; day two opens $26, closes $18. Set 3: day one opens $30, closes $20; day two opens $23, closes $27. Set 4: day one opens $15, closes $18; day two opens $17, closes $25.
- 3 minutes. For each day, write the body as a price range from low to high, such as $26 to $30.
- 6 minutes. Decide whether day two's range covers day one's. Label each set bullish engulfing, bearish engulfing or neither. The answers are bullish, bearish, neither and neither (both Set 4 candles point up).
- 3 minutes. Set 3 is not an engulfing. Pairs name the look-alike it matches (a harami) and say why.
- 3 minutes. Exit ticket: students explain in a sentence why engulfing is called a two-sided pattern.
Related Patterns
- How to Read a Candlestick Chart: how bodies and wicks are read, one candle at a time.
- Candlestick Patterns for Beginners: where the engulfing pattern sits among the common shapes.
- Harami: a small candle held inside the prior body.
- Three Outside Up and Down: an engulfing followed by a third candle in the same direction.
Frequently Asked
Questions
It is a two-candle pattern in which the second candle's body wraps around the first candle's body. It can be bullish or bearish, depending on which way the second candle points.
In a bullish engulfing, an up candle covers the body of a down candle, usually after a fall. In a bearish one, a down candle covers the body of an up candle, usually after a rise.
No. It is a clue that control may have shifted. Check the trend before it and nearby support or resistance before giving it much weight.
Put Candlestick Charts in Front of Your Class
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Indicators, patterns and examples in this article are for education and are not investment advice or a recommendation to buy or sell any security.
By Myles Gage, CEO & Co-Founder at Rapunzl.