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Let's start with the fact that it is customary to call a private reversal figure, which is located on the chart of Japanese candles, as absorption. Absorption necessarily consists of two candles. At the same time, it is imperative that the second absorption candle completely covered or, in other words, absorbed the first. As for the price direction after the figure, it depends on the colors of the candles, as well as on the previous trend.
Translated from English, "engulfing pattern" means "figure of absorption". A similar combination described above is available exclusively on Japanese candlestick charts. Most likely, it is precisely because of this feature that Japanese candles have an advantage over other types of charts.
The main feature of the absorption figure is the presence of exactly two absorption candles. At the same time, the first of them should not be "doji". Only in this case, the takeover can reverse the previous trend, that is, it acts as a reversal figure. The first candle should have a body smaller in size than the second candle. After all, only in this case the main condition can be fulfilled - the body of the second candle will completely absorb the body of the first. At the same time, these two absorption candles must have different colors. Their priority depends on which direction the turn will go.
If the first candle has shadows, then covering them with the body of the second candle is not a mandatory point. But ideally, it is desirable that the coating still took place. A reversal after the figure usually forms a sufficiently long and completely new trend, which has more attractive properties (it is more massive and longer) than the one that preceded it.
Absorption is a fairly reliable figure. The last characteristic increases significantly if you observe it on oversold or overbought plots. It is worth noting that such areas are detected using such technical indicators as Keltner Channels, Bollinger Bands, enveloping moving averages, as well as their analogues.
Ideally, two candles in absorption should be long, and their shadows, on the contrary, should be short or completely absent, that is, creating a so-called "marubose" from the candles. Everyone knows that the Maruboz brothers do not have upper and lower shadows at all. Thus, these candles consist of only one body. That fully corresponds to the ideal figure of absorption.
Note that the absorption figure is simultaneously a reversal figure. In the final, we will inevitably see a price reversal. If the price was initially moving downwards, and then an absorption was formed, then it will definitely eventually turn around and go up. Thus, a "bullish absorption" is formed. In the opposite case - "bear absorption".
It should be said that "bearish absorption" is characterized by the following properties: the first candle is of a light color; the second dark-colored candle; the presence of an upward preceding trend.
"Bullish absorption" is characterized by the first candle of a dark color; the second light-colored candles and the presence of a descending preceding trend.
