Reversal Patterns: Engulfing

🔁 Introduction: What Are Reversal Patterns?

Reversal patterns are candlestick formations that indicate a potential change in the current trend — either from bearish to bullish or bullish to bearish. One of the most powerful and widely used reversal signals in candlestick analysis is the Engulfing Pattern.

In the fast-moving world of crypto, recognizing a reliable reversal early can be the difference between a great trade and a missed opportunity.

In this article, you'll learn:

• What engulfing patterns are
• How to identify them
• When they are most effective
• How to avoid common traps

🟩 Bullish Engulfing Pattern

✅ Definition

A Bullish Engulfing Pattern occurs during a downtrend, when a small red (bearish) candle is followed by a larger green (bullish) candle that completely engulfs the previous candle's body.

This shows that buyers have taken control, overpowering the previous bearish momentum.

🔍 Characteristics:

• First candle: small red body
• Second candle: large green body that fully covers the first candle's body (not necessarily the wick)
• Appears at or near a support level

📊 Example Scenario:

Crypto: Ethereum

Price drops from $1,650 to $1,620 on a red candle. The next candle opens at $1,615, then closes at $1,670 (above the previous open). The green candle engulfs the red one, suggesting that bulls are stepping in.

🟥 Bearish Engulfing Pattern

✅ Definition

A Bearish Engulfing Pattern occurs during an uptrend, when a small green (bullish) candle is followed by a larger red (bearish) candle that completely covers the previous body.

This signals that sellers have overwhelmed buyers, and a reversal to the downside could follow.

🔍 Characteristics:

• First candle: small green body
• Second candle: large red body that fully engulfs the previous green body
• Appears at or near a resistance level

📊 Example Scenario:

Crypto: Solana

Price climbs from $90 to $93 on a small green candle. The next candle opens at $94, closes at $87 — fully engulfing the previous body. This can warn traders of a potential top or short-term decline.

🎯 Best Conditions for Engulfing Patterns

• Volume Spike: A strong engulfing pattern often comes with a noticeable rise in volume
• Support/Resistance Zones: More reliable if the pattern forms near key levels
• Overextended Trends: Works best when the market is overbought or oversold
• Larger Timeframes: More significant on 1-hour, 4-hour, or daily candles

😬 Common Mistakes

• ❌ Confusing a large candle for an engulfing without checking the body (wicks don’t count)
• ❌ Ignoring trend context — engulfing patterns are reversal, not continuation signals
• ❌ Using them in sideways (choppy) markets — they lose power without trend direction

💡 Pro Tips

• Combine engulfing patterns with RSI: an engulfing + RSI divergence = higher confidence
• Use trendlines or moving averages to filter signals
• Practice on past crypto charts using TradingView replay mode

🧠 Engulfing Pattern Cheat Sheet

✅ Conclusion

Engulfing patterns are simple but powerful reversal signals that can help you catch market turning points early. In crypto trading, where volatility is high and momentum shifts fast, mastering engulfing patterns gives you a clear edge — especially when combined with other tools like volume and support/resistance.

Practice spotting these patterns across different coins and timeframes, and always trade with risk management in mind.