Two-candle patterns are candlestick setups formed by two consecutive candles, where the second candle’s relationship with the first hints at a possible reversal or continuation. They are quicker to form than three-candle patterns but need more confirmation.
The most widely used ones are:
- Bullish and bearish engulfing: the second body fully covers the first.
- Harami: a small second body sits inside a large first body.
- Piercing line and dark cloud cover: the second candle closes past the midpoint of the first.
- Tweezer tops and bottoms: two candles with nearly equal highs or lows.
Here is an example. After a fall, a hypothetical stock forms a red candle from ₹250 to ₹240. The next day it opens at ₹238 and closes at ₹252, swallowing the whole red body. That is a bullish engulfing, and it is more meaningful if it appears at a support zone.
The common error is trading every two-candle pattern on a 5-minute chart. On lower timeframes they appear constantly and fail often. On daily charts, near clear support or resistance and with good volume, they are more useful.
We teach these patterns as part of a checklist, never in isolation, in our Technical Analysis course.