Bullish and bearish engulfing patterns: body, wicks and location

An engulfing pattern is a two-candle formation where the second candle's body completely covers the first candle's body, in the opposite direction. A bullish engulfing pattern is a small bearish candle followed by a larger bullish one; a bearish engulfing pattern is the reverse. It is one of the most recognisable candlestick patterns, and one of the most frequently misread, because it appears everywhere.

The definition

Bullish engulfing:

1. The first candle is bearish (close below open).
2. The second candle is bullish (close above open).
3. The second candle's body opens at or below the first candle's close and closes above the first candle's open, so its body covers the first body entirely.

Bearish engulfing is the mirror image: a bullish candle followed by a larger bearish candle whose body covers it.

The engulfing glossary entry has a compact definition.

Body versus wick

Classic candlestick analysis compares bodies, not wicks. The body represents where the period opened and closed; the wicks show excursions that did not hold. A second candle whose body engulfs the first body, even if the first candle's wicks stick out beyond it, is still an engulfing pattern in the traditional sense.

Some traders prefer a stricter version where the second candle engulfs the first one's entire range, wicks included. That version occurs less often and represents a more decisive shift. Either is fine; just do not switch definitions depending on which one fits the chart in front of you.

Gaps in continuous markets

In textbooks drawn from stock charts, the second candle often opens with a gap beyond the first candle's close. In forex, which trades around the clock on weekdays, and in OTC price series, each candle typically opens at or next to the previous close. So in these markets an engulfing pattern usually looks like a large candle starting where the small one ended and running past its open. The defining feature is the size and direction of the second body, not a gap.

Location matters most

An engulfing pattern after a decline at clear support tells a story: sellers had control, then buyers overwhelmed an entire period's worth of selling. In the middle of a sideways range, the same two candles are ordinary back-and-forth movement.

Things that add weight:

• a preceding move in the opposite direction,
• a level where price has turned before,
• a second body clearly larger than the first, not just barely covering it.

A worked example

GBP/USD on M15 drops for five candles from 1.27400 to 1.27050, close to a level where it bounced yesterday. The sixth candle is small and bearish: opens 1.27070, closes 1.27050. The seventh opens at 1.27050, briefly dips to 1.27030, then rallies and closes at 1.27120, above the previous candle's open. That is a bullish engulfing pattern at support.

What next? Many traders watch whether the following candle holds above the engulfing candle's midpoint, about 1.27085. If it does, the shift gains support. If price falls back below 1.27030, the low of the pattern, the engulfing candle was a short-lived squeeze and the decline continues.

The failure case is common: a bullish engulfing pattern forms, the next candle drifts sideways, and the one after resumes the downtrend. A single large candle often reflects one burst of orders, not a lasting change.

Related patterns

• If the second candle covers only part of the first, it may instead be a piercing line or dark cloud cover.
• If the second candle is small and sits inside the first, that is the opposite idea: a harami.

Short expiries and OTC

On S5–M1 charts, engulfing patterns form every few minutes simply because one random tick burst is larger than the previous one. For short expiries, the pattern is more meaningful on M5 or M15 at a clear level, with the lower timeframe used only for timing.

On Sky Trade's OTC instruments, prices are generated by Sky Trade's server and do not follow any real market. The model makes the next move unpredictable, so engulfing candles there are larger random moves following smaller ones, with no information about what comes next.

How to use it in the Sky Trade terminal

Use the Candles chart type and mark levels in advance with horizontal lines. Wait for the engulfing candle to close; with the candle timer enabled in settings you can see exactly when that happens.