【Engulfing Pattern】 Detailed explanation. Definition: Refers to a trend where the previous candlestick is completely engulfed by the following candlestick. Due to its characteristic shape, it is also called a hugging line.

The engulfing pattern includes similar combinations such as bullish candlestick with another bullish candlestick, and bearish candlestick with another bearish candlestick, as well as different combinations like bearish followed by bullish, and bullish followed by bearish. Among these, the bullish engulfing and bearish engulfing patterns suggest that a trend reversal may occur. Engulfing patterns of the same type (bullish with bullish or bearish with bearish) are less significant.

Therefore, among these combinations, the most noteworthy are the bullish engulfing and bearish engulfing patterns. Why is that? Because the engulfing pattern essentially completely negates the four price points of the previous candlestick—namely, the opening price, closing price, highest price, and lowest price. When a candlestick is fully negated and the direction switches from bullish to bearish or vice versa, it indicates that a trend reversal might be imminent.

Let’s try to combine two candlesticks to analyze, starting with the bullish engulfing pattern. When these two candlesticks are combined, they form a bullish candlestick with a long lower shadow. As mentioned in yesterday’s tweet, a lower shadow on a bullish candle appearing during a downtrend is considered a very strong reversal signal.

Next, let’s look at the bearish engulfing pattern. When these two candlesticks are combined, they form a bearish candlestick with a long upper shadow. If this appears during an uptrend, it is also considered a strong reversal signal. This indicates that the upward momentum has been completely suppressed; it failed to push higher, suggesting that the selling force is very strong, so the trend may turn downward. We have already explained in detail about lower shadow bullish candles and upper shadow bearish candles in previous tweets. If you haven’t seen them yet, you can review those.