A green candle whose body completely covers the previous red candle's body, showing buyers overwhelming the prior period's sellers.
Strict definition: the current candle's open is at or below the prior close and its close is at or above the prior open, so the real bodies engulf. Shadows are usually ignored. Context should be a decline or a test of support.
Example: a red candle runs 52.00 down to 51.40. The next candle opens at 51.35 and closes at 52.20. Everyone who sold in the prior bar is now underwater, which is the mechanical reason these can start a move.
The pattern works better when the engulfing candle has heavy volume, when it engulfs several prior candles rather than one, and when it forms at a level rather than mid-range. On a small timeframe it occurs constantly and means very little. Related to engulfing-candle in the general glossary.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The parts of a candlestick. One candle sums up a slice of time: the thick real body runs from the opening price to the closing price, and the thin wicks reach out to the highest and lowest prices traded. Colour tells you which way the body ran.
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