Engulfing Pattern

A reversal pattern on a Japanese Candlestick chart that can be bearish or bullish depending upon whether it is in an uptrend or downtrend. An Engulfing Pattern is a two candlestick pattern, where the first day is characterized by a small body, followed by a day whose body completely engulfs the previous day’s real body. The second day’s real body (candle) should be the opposite color of the first real body. The bearish engulfing pattern signals the end of an uptrend and the bullish engulfing pattern suggests a downtrend reversal.