Bullish and Bearish Engulfing Candlestick Patterns: How to Identify Them

An engulfing pattern is a two-candle formation in which the second candle's real body completely covers (engulfs) the real body of the first, and the two candles are opposite colors. It's one of the most commonly cited candlestick reversal patterns.

Bullish Engulfing

A bullish engulfing pattern appears after a decline:

1. Candle 1: a small red (down) candle, continuing the downtrend.
2. Candle 2: a larger green (up) candle that opens below the first candle's close and closes above the first candle's open.

The second body "swallows" the first. The traditional reading: sellers were in control, but the next period buyers overwhelmed them, closing above where the previous period began. It's read as a possible shift in momentum from sellers to buyers.

Bearish Engulfing

A bearish engulfing pattern appears after an advance:

1. Candle 1: a small green (up) candle, continuing the uptrend.
2. Candle 2: a larger red (down) candle that opens above the first candle's close and closes below the first candle's open.

The traditional reading: buyers were in control, but the next period sellers took over decisively. It's read as a possible shift from buyers to sellers.

What Counts as "Engulfing"

The usual definition looks at real bodies (open to close), not the wicks. Some people require the second candle's entire range, including wicks, to cover the first; that's a stricter and less common version. Platforms differ in how they detect the pattern, so the same chart can show different results.

What Makes It More Meaningful (Traditionally)

Commonly cited conditions:

• A clear prior trend. The pattern is a reversal signal, so it should follow a meaningful decline or advance, not a sideways drift.
• A large second candle relative to the first, suggesting a decisive shift.
• Elevated volume on the engulfing candle.
• A nearby support or resistance level. A bullish engulfing at a known support level is read differently than one in the middle of nowhere.
• Confirmation from the next candle continuing in the same direction.

A Worked Example

A stock has been falling. On Monday it opens at $40.00 and closes at $39.50 (a small red candle, body $0.50). On Tuesday it opens at $39.30, below Monday's close, and rallies to close at $40.60, above Monday's open.

Tuesday's body spans $39.30 to $40.60, completely covering Monday's body of $39.50 to $40.00. That's a bullish engulfing pattern. A trader following the standard approach might wait for Wednesday to hold above $40.00 before treating it as meaningful.

Gaps Are Less Common Than the Definition Implies

The "opens below the prior close" condition assumes a gap between sessions. In markets that trade nearly continuously, or for stocks where the open is close to the prior close, the second candle's open is often within a few cents of the first close. Many analysts relax the rule, which makes the pattern more common and less selective.

What the Evidence Says

Engulfing patterns are among the more heavily tested candlestick signals. Results are mixed. A 2006 study of Dow Jones stocks by Marshall, Young, and Rose found little evidence that candlestick patterns generated reliable profits, and other studies find modest effects in some markets and periods that often weaken once costs are included. See do chart patterns actually work.

Limits

• It's frequent. Many engulfing candles are followed by no meaningful reversal.
• Definitions differ, so counts and results are inconsistent.
• The trend context is subjective. How much of a decline counts?
• Timeframe matters. An engulfing candle on a weekly chart describes a whole week; on a 5-minute chart, a few minutes. See timeframes.
• Failure is normal. A bullish engulfing can be followed by a lower low.

For related single-candle signals, see the hammer, shooting star, and doji, and the wider candlestick glossary.

This article is for educational purposes only and is not investment advice.