Engulfing candlesticks, engulfing candles are long green or red price candles with little or no nose and tail are often followed by other candles of the same colour, pointing in the same direction.
They engulf the previous candles, meaning the body of previous candles would fit inside the body of the engulfing candle. This indicates that either buyers or sellers have temporary control. Green engulfing candles, the buyers have control. Red engulfing candles, the sellers have control.
Engulfing candles can appear at bottoms or tops or in the middle of a price move.
Engulfing Candlesticks, engulfing candles
The traditional title of Engulfing Candle is given to those candles that engulf the candle to the left of it. That is the body of the engulfing candle engulfs the body of the candle next to it on the left. These are often the Engulfing candles that you see at the bottoms and tops.
However a big candle of any sort is worth paying attention to. When they appear in the middle of moves they often do not have a candle directly to the left of them and therefore a question to ask yourself in identifying them is “is the body of this candle bigger than the body of any of the last five candles?” If it is then you can consider it an engulfing candle, even if it isn’t directly engulfing the candle on the left of it. In this case it is a powerful consolidation candle.
False trading signals?
Take care when one of these candles appears at a bottom after a long move down or up. It could be generated by traders taking profits from the long move, otherwise called an exhaustion candle. It may be followed by a continuation of the previous move. As always, look for confirmation and confluence before trading.
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