Last Engulfing Bottom & Top

A Last Engulfing Bottom is a two-candle pattern that forms in a decline: a green candle, then a larger red candle whose body wraps the green body. It is named as a bullish reversal, a sign the decline may be ending.

If that shape sounds familiar, it should. It is exactly a Bearish Engulfing: a red body that opens above the green close and closes below the green open. The only difference is where it appears. A Bearish Engulfing comes after a rally. A Last Engulfing Bottom comes after a decline.

The mirror, a Last Engulfing Top, is a Bullish Engulfing shape (a red candle wrapped by a larger green one) found in a rally, and it is named as bearish. This guide teaches the Bottom first and the Top as its mirror.

Two sessions build the pattern, and a later one decides it. The two candles alone describe sellers winning; the bullish case needs the third step.

In most reversal patterns the last candle already moves against the trend: a Bullish Engulfing ends green after a decline. Here the red candle moves with the decline, yet the name still calls a bottom. Move the same two candles from the top of a rally to the bottom of a decline, and the name, and the direction it points, both change.

After a rally, a green candle wrapped by a red one is a Bearish Engulfing. Buyers had been winning, and one red session erased their latest day. That is a possible turn against the trend, so the shape reads bearish.

After a decline, the same red session is not against the trend. It is the trend: sellers erasing a bounce, as they have been doing for weeks. On its own, that reads as more of the same. The pattern only becomes a bottom if the market then does the opposite of what the red candle suggests.

That is the skill this pattern teaches. Before naming any engulfing, look left and ask which way the trend ran into it. The color of the second candle tells you who won that day. The trend tells you whether that win was a turn or a continuation.

By name, a Last Engulfing Bottom is bullish and a Last Engulfing Top is bearish. “Last” is the idea: this engulfing may be the final heavy push of the decline. Sellers spend a large effort wiping out the bounce, and if that effort was the last of their selling, there is little left to push price lower.

The candles alone do not settle it. Read on their own, they look bearish. A red candle that wipes out a green one, in a market already falling, is sellers winning a bigger day than buyers just did. Nothing in the two candles shows buyers taking over.

The confirmation decides. A later close above the pair's high means price has taken back the whole red day. (Some traders act a little earlier, on a close above the red candle's open.) Traders who sold short during it, betting on a fall, are now losing money, and their buying back can add to the rise. A close below the pair's low means the decline simply carried on, which is what the candles looked like all along.

So treat the bullish name as a claim, not a signal. Until that later close, you are looking at a red candle in a downtrend.

Both appear after a decline and both are filed as bullish. They are close to opposites.

A Bullish Engulfing already shows buyers taking over: its green close sits above the red open. Many traders act on that close. A Last Engulfing Bottom shows the reverse on its last day, so there is nothing to act on yet. Its bullish case is entirely in the later close above the pair.

That makes the two easy to mix up in a hurry. Both are an engulfing, after a decline, with a bullish label. Check the color of the second candle: green is a Bullish Engulfing, red is a Last Engulfing Bottom.

The two are mirrors: every rule flips.

A Last Engulfing Top is a Bullish Engulfing shape in a rally. A red candle (a one-day dip) is wiped out by a larger green candle, which on its face is buyers pushing the advance on. The bearish name says this may be the last big buying day. As with the Bottom, the candles alone look like the trend continuing. A later close below the pair's low confirms the top (quicker: below the green candle's open). A close above the pair's high fails it. The stop goes above the pair's high, usually the green candle's high.

The two candles mark a range. The trade waits for price to leave it upward.

A pattern whose candles look bearish needs more help from its surroundings than most. These checks decide whether a close above the pair is worth trusting.

Moving averages. A bullish reversal has an easier job when the larger trend is still up. A Last Engulfing Bottom near a rising 50-day moving average is a dip in that trend; under a falling one, the decline has more behind it. Read the Candlesticks + Moving Averages guide →

Volume. Heavy volume on the red candle cuts both ways. It means sellers committed hard, which is bearish until proven otherwise. But if price later closes above the pair, and if much of that selling was short selling, more traders are caught on the wrong side and may buy back. Heavy volume helps the bullish case only once that close comes. Read the Candlesticks + Volume guide →

The weekly chart. Check whether the daily decline has reached an area where the weekly chart held before, such as an earlier weekly low. A Last Engulfing Bottom there formed where buyers have a reason to show up. With no weekly support below, nothing on the weekly chart backs the turn. Either way, the turn waits for a close above the pair's high. Read the Candlesticks + Timeframes guide →

The Last Engulfing Bottom is a lesson in reading the trend before the candle. Its two candles are a Bearish Engulfing; only the decline around them gives the pattern a different name.

That name is a claim about what happens next: that this red day was the last big one. The candles cannot prove it. A later close above the pair can, and a close below it says the decline carried on. Mark the top and bottom, wait for the close, and let it decide.