The engulfing pattern is a two-candlestick pattern, which is used by traders and investors to identify potential trend reversals in financial markets. This pattern can have a shadow, but the shadow is not the important point of these types of candles, but the very important thing is that the second candle should completely cover the previous candle in order to form this pattern.
This type of candlestick pattern is a very good opportunity to enter the trade, so if you come across a bullish engulfing candle in the support area, you can open a long position according to the general trend of the market in higher time frames and other analytical items. On the contrary, in the resistance zone, seeing bearish engulfing, you can take a short position according to the above. The engulfing chart pattern is a technical analysis pattern used to indicate a reversal of the current trend.
The key features of this pattern are as follows:
There are two types of this candle, bullish and bearish, which is a type of reversal pattern.
It is a two-candlestick pattern where the second candlestick completely engulfs the first candlestick.
The concept of engulfing candlestick pattern:
Traders and investors often use the engulfing pattern as a signal to enter or exit trades, depending on the direction of the trend and the type of engulfing pattern.
There are two types of engulfing patterns
– Bullish engulfing pattern: formed when a small bearish candlestick is followed by a larger bullish candlestick that completely engulfs the bearish candlestick. The bullish candlestick indicates a potential reversal of the downtrend and means buyers have gained control of the market. Traders may use this pattern as a signal to enter long/buy positions
– Bearish engulfing pattern: occurs when a small bullish candlestick is followed by a larger bearish candlestick. The bearish candlestick completely engulfs the bullish candlestick, indicating a potential reversal of the uptrend, and expecting the price to fall which means sellers have gained control of the market. Traders may use this pattern as a signal to enter short/sell positions
It’s important to note that you should use this pattern in conjunction with other analysis techniques and risk management strategies to increase their chances of success and never make your trading decisions rely upon solely the candlestick pattern.