ENGULFING CANDLE | powerful price reversal📚

✅The engulfing model (external bar) is mainly a reversal pattern (although in rare cases it may indicate a continuation of the trend). It looks like two candles, the first of which is small, and the second is large, with a body larger than the entire previous candle, and directed in the opposite direction.

✅From the point of view of crowd movement, such a pattern means that the strength of the current trend is drying up (this is evidenced by the small size of the first engulfing candle). The crowd does not know in which direction to move and, figuratively speaking, is marking time. The appearance of a powerful candle that absorbed the previous one and closed in the opposite direction marks the beginning of a new, strong trend.

⚠️There are several mandatory conditions that the pattern must meet in order for its signal to provide the maximum probability of working out:

1️⃣Before the pattern itself, there must be a downtrend or an uptrend in the market. The movement may be small, but its presence is mandatory;

2️⃣The body of the second candle should be of a different color and orientation (bearish after bullish and bullish after bearish). Shadows may not be absorbed, but then the signal is considered weaker;

3️⃣The body of the second candle should have a contrasting color with respect to the body of the first. The exception is when the body of the first candle is very small (doji or close to it).

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