A small up candle is swallowed whole by the next day's down candle. Buyers set the range, then sellers took all of it back and more — which is why it only counts as a signal if there was a rally to reverse.
Two sessions. The first closes higher than it opened. The second opens at or above that close, then closes below the first candle's open — its real body covers the previous body completely. The wider the second body, the more decisive the handover from buyers to sellers.
It only means something after an advance. The scan below lists a stock only if it was trading above its 20-day average before the pattern formed, so there was a genuine rally for sellers to reverse. The same two candles inside a range are noise.
Volume separates a real distribution day from a quiet drift. A day marked Confirmed traded at least 1.2× its 20-day average — sellers showed up in size rather than buyers simply going missing.
Most often near the end of a long uptrend that keeps going. A single heavy day of profit-taking in a strong trend looks identical to a top, and the difference is only visible afterwards. Check whether price is still above the 50-day average — if it is, the trend has not actually broken.
Ex-dividend days and block deals produce wide bodies that reflect mechanics rather than sentiment. So do index rebalancing days, when passive flows can dominate a single session's range.
Traders who use this pattern generally wait for the following session to close below the engulfing candle's low before treating it as confirmed. Acting on the candle itself is the most common mistake.