Engulfing Pattern

Hero pattern of 3. One of the most-cited candle reversal patterns.

What it is

A two-bar candle pattern where the second candle's body fully engulfs the first candle's body (close beyond the open and open beyond the close, in opposite direction).

Bullish engulfing: a green bar that completely engulfs the prior red bar's body.
Bearish engulfing: a red bar that completely engulfs the prior green bar's body.

What it tells you

Momentum has flipped. The candle range and the close-beyond-prior-open imply that the dominant side was overwhelmed. This is most meaningful at the end of a trend, not in mid-trend chop.

In our backtest, bullish engulfing on liquid US equities at higher timeframes (1h+) shows hit rates in the 58–68% range in confluence with a Higher Low or Order Block retest. As a standalone signal in mid-trend chop, hit rate drops below 55% and the pattern is marked experimental.

Visual example

After a 4-day downtrend, price closes red on Tuesday. Wednesday opens slightly below Tuesday's close, sells off intraday, then reverses hard and closes above Tuesday's open — a bullish engulfing. If Tuesday's low also coincides with a prior support level or an FVG, the setup carries 3-of-3 confluence.

How to use it

Filter by structure: engulfing in the direction of the higher-TF trend has significantly better odds than counter-trend.
Look for confluence: engulfing + at a Higher Low + with volume confirmation = high-conviction setup.
Wait for the close: the pattern only completes at bar close; intra-bar reversals can fade.

When NOT to trust it

In choppy ranges with no clear trend.
On low-volume bars (<half of average).
Right at a major catalyst (earnings, FOMC) where flow is event-driven.
On the 5m or lower — engulfing on micro-timeframes is noise.

Price Action
Hammer / Hanging Man (sibling reversal)