Candle Patterns Part 2: Two-Candle Signals of Shift in Control

In Candle Patterns Part 1 we looked at single candles:

• Long wicks
• Large bodies
• Dojis

and read them as “which side clearly won or failed once”.

Now we take one small step further:

“When two candles in a row form a pattern,
how does control shift between buyers and sellers?”

That’s what we’ll train our eyes to see.

💡 On your first read, it’s enough to remember just three ideas:

1. Inside bar = small candle inside a large one
   → a short pause/compression after a strong move
2. Engulfing = a large opposite candle that completely covers a smaller one
   → a “hand-over of control” between sides
3. Tweezers = two candles rejecting the same high or low
   → “this price level was tested twice”

You can always come back for the finer details on your second or third pass.

Tap to zoom

1. Two-candle patterns we’ll cover

In this part we focus on three representative two-candle patterns:

1. Inside bar
   → The second candle’s high and low are fully inside the first candle’s range

2. Bullish / bearish engulfing
   → The second candle’s body (or overall range) engulfs the first candle

3. Tweezer top/bottom
   → Two candles with almost the same high (top) or low (bottom)

Again, the names matter less than the story:

• Who attacked first?
• Who defended successfully on the second candle?
• At what location (support, resistance, swing position) did this happen?

👉 Key takeaway:
A two-candle pattern is a compressed summary of
a two-step exchange of control between buyers and sellers.

2. Inside bars: compression inside a larger move

An inside bar is usually defined as:

• The second candle’s high and low are both
• Fully contained within the high–low range of the first candle

The first candle is often called the “mother bar”,
the smaller second candle the “inside bar”.

2-1. What an inside bar says

In most cases an inside bar is the market saying:

“We just had a big move,
now the market is taking a short breather inside that range.”

• First large candle:
  → a strong statement in one direction (up or down)
• Second small candle:
  → both sides are more cautious,
  price swings narrow down (volatility contraction)

Tap to zoom

2-2. Inside bars within a trend: continuation vs shift

Inside bars often appear mid-trend.

• Strong impulsive bullish candle
  → small inside bar forms within its range
• A break above the mother bar’s high
  → a candidate for trend continuation
• A failure to break higher followed by a break below the mother bar’s low
  → potential sign that the trend is losing strength

From Chart Basics – Timeframes and
Swing vs Correction:

• On a higher timeframe, this whole inside-bar cluster
  may compress into a single small candle or doji.
• So with inside bars it’s useful to ask:

“If I zoom out,
what single candle does this two-candle structure turn into?”

2-3. Inside bars near support and resistance

At key levels, the meaning shifts a bit.

• In an uptrend, price pushes into
  higher timeframe resistance, then prints several inside bars just below it
• In a downtrend, price falls into
  key support, then prints inside bars just above it

In such spots you’re often seeing:

• The previously dominant side losing momentum, and
• Both sides “waiting to see” which way the next push will go.

Tap to zoom

👉 Key takeaway:
An inside bar is a pause and compression inside a prior move,
not a signal by itself that the move must reverse or continue.

3. Engulfing candles: when control is handed over

An engulfing pattern appears when the second candle’s body
completely covers the body (or even full range) of the first candle.

• Bullish engulfing:

  • First candle: small bearish or weak bullish candle
  • Second candle: large bullish candle whose body fully covers the first

• Bearish engulfing:

  • First candle: small bullish or weak bearish candle
  • Second candle: large bearish candle whose body fully covers the first

3-1. How a bullish engulfing forms

Take a bullish engulfing as an example:

1. The first small candle still reflects
   the downside bias or leftover selling from prior action
2. On the second candle:
   • Price may initially continue lower
   • But then buyers step in aggressively
   • The candle closes above the first candle’s high

In other words:

“We were still in the sellers’ territory,
but on this second candle, buyers took control decisively.”

Tap to zoom

3-2. Where bullish engulfing carries more weight

Bullish engulfing becomes a candidate reversal signal when it appears:

• At clear higher timeframe support
• Near prior swing lows
• After a prolonged down-leg, with rising volume

Combining this with Chart Basics – Volume:

• First small candle:
  volume may decline as selling energy fades
• Second large bullish candle:
  volume expands as real buying steps in

3-3. Bearish engulfing: handover at the top

Bearish engulfing is the mirror image.

• After an uptrend
• Near important resistance or previous highs
• First candle is small and uncertain
• Second candle is a large bearish candle that engulfs the first

Tap to zoom

Here the story is:

“At this price area,
buyers no longer have an easy win;
sellers just showed clear initiative.”

3-4. Don’t over-trust engulfing patterns

• Engulfing patterns in the middle of a range
  are often just noise.
• In strong trends, you may see engulfing patterns that:
  • Trigger a shallow pullback
  • But then the trend resumes in the same direction

👉 Key takeaway:
Engulfing patterns signal a clear shift in control between candles,
but they do not guarantee that the larger trend is over.

4. Tweezer tops and bottoms: testing the same level twice

A tweezer forms when two candles:

• Stop at almost the same high (tweezer top), or
• Stop at almost the same low (tweezer bottom)

The highs/lows don’t need to match perfectly tick-for-tick,
but visually they should line up as a common level.

4-1. Tweezer bottoms: two tests of support

A classic tweezer bottom example:

1. The first candle sells off and
   forms a low (body or wick) at a certain level
2. The second candle drops to about the same low,
   then buyers defend again and push the close higher

Tap to zoom

Conditions that strengthen the pattern:

• Confluence with higher timeframe support
• Appearing after a series of lower lows
• The second candle closing as a bullish candle
  (e.g., long lower wick, close near the top)

4-2. Tweezer tops: two tests of resistance

A tweezer top is the opposite:

1. The first candle rallies into a certain high and stalls
2. The second candle reaches a similar high,
   but then sellers step in and push it lower

Tap to zoom

This pattern carries more information when:

• It forms after a long advance
• It overlaps with higher timeframe resistance
• The second candle closes as a bearish candle

4-3. Limitations of tweezer patterns

• Many “tweezers” are simply random symmetry in noisy areas.
• Tweezer patterns in the middle of a range or in
  unimportant zones are rarely worth trading on their own.

👉 Key takeaway:
Tweezers show two tests of the same price level,
not a guaranteed turn. Context still decides the weight of the signal.

5. Common principles for trading two-candle patterns

Although we studied inside bars, engulfing patterns, and tweezers separately,
you can apply a common set of principles.

5-1. Anchor them in higher timeframe structure

Always combine the pattern with:

• Support and resistance levels
• Swing vs correction structure
• Higher timeframe candles

Examples:

• A daily bullish engulfing may be
  a cluster of small down candles + one big up candle on lower timeframes.
• A 15-minute engulfing might compress into
  just a small wick on the daily chart.

5-2. Use pattern “extremes” as a risk reference

Most two-candle patterns give you natural “extremes”:

• Inside bars: the mother bar’s high/low
• Engulfing patterns: the large second candle’s high/low
• Tweezers: the shared high or low of the two candles

If price breaks beyond these extremes in the opposite direction,
you can treat the pattern as invalidated.

In practice this often means:

• Placing a stop beyond the opposite extreme of the pattern
• Treating that level as “where the pattern thesis is wrong”

(Details on stop placement and position sizing
will be covered in Risk Management.)

5-3. Think in terms of small edges, not certainty

A two-candle pattern is simply:

“A tool to estimate which side has a slightly higher probability
from here.”

It is not:

• A guarantee of immediate major trend reversal
• A reason to apply heavy leverage on the pattern alone

Especially in leveraged environments,
treating patterns as hard rules instead of
“small edges within a risk framework” often conflicts with long-term survival.

👉 Key takeaway:
Two-candle patterns are magnifying glasses for market psychology,
not switches that flip the market from up to down.

6. Next steps: three-candle, complex, and failure patterns

To summarize:

• Inside bars = compression and pause inside a larger move
• Engulfing patterns = hand-over of control across two candles
• Tweezers = two tests of the same level

In the next article (Candle Patterns Part 3), we’ll look at:

• Three-candle patterns (e.g., morning/evening stars)
• Complex combinations built from 2–3 candles

and connect them back to the single- and two-candle psychology we’ve built here.

Later, in a dedicated part, we’ll explore:

• “Pretty” patterns that fail often
• Patterns designed as traps for late buyers/sellers

so that:

“Pattern = shape” gradually becomes
“Pattern = a short summary of a specific situation” in your mental model of the market.