Question: What is the candlestick pattern called "Engulfing Pattern"?
A long black candlestick is formed at the end of an uptrend, preceded by a small white candlestick.
The body of the small white candlestick is completely engulfed by the body of the long black candlestick.
The bullish pressure of the prevailing upward move is overcome by sellers entering the market aggressively at the end of the rally.
This forms a long black candlestick with bearish implications.
During the course of an upward move and while prices rally higher, the presence of a smaller white body signifies that longs have second thoughts on maintaining the bullish direction.
While the bulls show signs of weakness, the bears enter the market aggressively as they are lured by the attractiveness of high prices.
As supply is higher than demand, and sentiment shifts to negative, prices decline to lower levels.
Supply/Demand | Supply is greater than demand |
---|---|
Sentiment | Negative |
Direction | Bearish |
Trigger | Consider selling if next candle falls below the low of the long black candle |