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The Engulfing Pattern is a two candle pattern. There are two significant specifications for this pattern.

• The direction of the two candles is opposite to each other. For example if the first one is a bearish candle then the second one is a bullish candle. The first candle could also be a doji in exceptional cases.
• The real body of the second candle covers the real body of first candle (see image).

This formation could be a sign of reversal if appears on top of an uptrend or at the bottom of a downtrend.

The engulfing pattern is to some extent similar to the outside reversal day pattern. There are, however, some differences depending on how you define outside reversal day.

Relevant article: The Engulfing Pattern

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