65-Day Academy · Day 8 · Reading Charts
Bullish & Bearish Engulfing
The engulf
A bullish engulfing: after a decline, a green candle whose BODY completely swallows the previous red body (open below prior close, close above prior open). Buyers didn't just win — they erased the entire previous period's selling. Bearish engulfing is the mirror after a rally.
Why it works
It is a violent transfer of control: the new period's range exceeds the old one in the opposite direction. At support/resistance, after an extended move, with volume — engulfings are among the highest-probability simple patterns. Bulkowski's backtests put them around 60–65% in the right context — good, but nowhere near certain.
The trap
Wicks don't count for the "engulf" (body vs body), and context is everything: an engulfing in the middle of nowhere is noise. Also watch size — a tiny prior candle makes "engulfing" trivial and meaningless.
What you'll practise
After a 5-day decline into support: prior candle O 52, C 49 (red). Today: O 48.8, C 53.2 (green). What pattern and read?
20 XP in the app · intermediate
Sources
- Engulfing PatternInvestopedia
- Encyclopedia of Candlestick ChartsThomas Bulkowski
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All lessons are for educational purposes only and are not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk and are not suitable for every investor.