Crypto glossary
Engulfing pattern
An engulfing pattern is a two-candle reversal signal in which the second candle's body completely covers the body of the first, in the opposite direction.
In a bullish engulfing pattern, a down candle is followed by an up candle whose body opens at or below the first candle's close and closes above its open. In a bearish engulfing pattern, an up candle is followed by a larger down candle that swallows it. The second candle shows that the side that was in control has been overwhelmed within a single period.
Engulfing candles are among the most widely cited candlestick signals in crypto, especially on daily and weekly bitcoin charts. Because crypto trades continuously, gaps between one candle's close and the next one's open are rare, so the pattern usually depends on the size of the second body alone, which makes it slightly different from its classic stock market form.
The signal is stronger at key levels, after an extended move and with higher volume on the engulfing candle. In the middle of a range or a choppy market, engulfing candles appear often and carry little information.
Example
After a week of decline, BTC prints a red daily candle followed by a green candle that opens at the same level and closes well above the previous open, forming a bullish engulfing at support.