Engulfing form is a combination form composed of several candle lines we will introduce. The engulfing form belongs to the main reversal form , which is composed of two candlestick entities with opposite colors.
refers to the market originally in a downward trend, but later a firm white entity appeared. This white entity "carried into the arms" the black entity in front of it, or swallowed it (this form is named after it). It has a nickname called "Holding Line Form", and the truth is clear at a glance. (Maybe on Valentine's Day, I will call the swallowing pattern "hugging line pattern".) This situation shows that the buying pressure in the market has overwhelmed the selling pressure.
or the market is originally rising towards a higher price. However, after the current white entity is engulfed by the latter black entity, it forms the top inverted signal. This situation shows that supply in the market overwhelms demand.
Regarding the engulfing pattern (line-envering pattern), we have three criteria for discrimination:
1. Before engulfing the pattern, the market must be in a clear upward trend (bearish engulfing pattern) or downward trend ( bullish engulfing pattern), even if this trend is only short-term.
2. The engulfing form consists of two candle lines. The entity of the second candlestick must cover the entity of the first candlestick (but it does not necessarily need to engulf the upper and lower shadow line of the former).
3. The second entity of the engulfing form should be the opposite color of the first entity. (There is an exception to this criterion, provided that the first candle line of the engulfing form is a cross line. In this way, if a small cross line is engulfed by a huge white entity after a long downward trend, it may form a bottom reversal pattern. Conversely, in an upward trend, if a cross line is engulfed by a huge black entity, it may form a top reversal pattern).
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