Engulfing Candle

An engulfing candle is a two-candle reversal pattern in which the second candle's body completely covers the body of the first candle in the opposite direction. A bullish engulfing forms when a red candle is followed by a larger green candle that opens at or below the prior close and closes above the prior open, showing buyers overwhelmed the previous session's sellers. A bearish engulfing is the mirror image: a green candle swallowed by a larger red one.

For example, after a multi-day decline, Bitcoin prints a red daily candle from $59,000 down to $58,200, then the next day opens near $58,200 and closes at $60,000. The green body engulfs the red one — a bullish engulfing — and traders would read it as a potential shift in control, particularly because it appeared at the end of a decline rather than mid-range.

The pattern is considered stronger when it forms at a meaningful support or resistance level, on elevated volume, and after an extended move. A common misconception is that any engulfing candle signals reversal; engulfing patterns that appear in the middle of choppy ranges carry little weight, and in crypto's 24/7 markets, where candles open exactly where the previous one closed, the classical gap component of the stock-market version rarely exists — only the body relationship matters.