GLOSSARY // Technical Analysis
Engulfing Candle
An engulfing candle has a body that completely covers the prior candle's body: a bullish engulfing closes above the previous open after opening below the previous close, and a bearish engulfing does the reverse. The wicks do not need to be engulfed, only the open-to-close body.
The pattern matters because it shows a full reversal of the prior bar's result inside a single period. Everyone who bought or sold during the previous candle is now on the wrong side of the close. The bigger the engulfing body relative to recent candles, and the heavier the volume, the more decisive the read.
Like every candlestick pattern it is a probability shade, not a trigger. An engulfing candle against the prevailing trend fails more often than one that fires in the trend's direction after a pullback.
Day one, a stock prints a red candle from 41.80 down to 41.20. Day two, it opens at 41.10, below the prior close, and finishes at 42.10, above the prior open. The 1.00-point green body swallows the 0.60-point red body: a bullish engulfing. Volume runs 1.8x the 20-day average, and the stock adds another 3% over the next two sessions.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.