Engulfing Overlap Zone [8 Types]Engulfing Overlap Zone
This script looks for the moment control changes hands.
An engulfing pattern forms and commits one side of the market. Later that pattern breaks. On or
around the same candle, an engulfing pattern in the OPPOSITE direction confirms. When the two
structures occupy the same price area, that shared area is where one side was trapped and the
other took over. This script finds those moments and draws only that area.
Nothing else is plotted. Ordinary engulfing patterns, and engulfing patterns that simply failed,
are used internally but never drawn, because on their own they are not what this tool is about.
WHAT MAKES THIS DIFFERENT
1. It reports a transfer of control, not a pattern.
Most pattern tools mark every occurrence they find. This one requires a three step sequence to
complete before anything appears: a pattern forms, that pattern breaks, and an opposing pattern
confirms in the same price area. Any of the three missing means nothing is drawn.
2. The zone is measured, not just marked.
Two zones can touch by a hair or sit almost perfectly on top of each other. Those are very
different situations, so the script measures how much of the zone is actually shared and states
it as a percentage. You can then hide everything below a threshold you choose.
3. Everything is sorted into eight types.
The zone carries the identity of the engulfing pattern that took over, including whether that
pattern grabbed liquidity before it confirmed. Each of the eight can be shown or hidden
independently and has its own alert.
4. The hard part is the pairing.
When a pattern breaks there is often more than one opposing pattern nearby that could be its
counterpart. Picking the right one, and rejecting the ones that only look related, is what this
script is really about. The rule used is simple to state and is described below, but it is the
piece that decides whether the output is meaningful or noise.
THE PATTERNS INVOLVED
A candle is Green when close is greater than open, Red when close is less than open, and a Doji
when close equals open. A Doji is neither. Only fully closed candles are read, and the running
candle is never used.
Regular engulfing, two candles
R Buy EG: Red Base candle, and the very next candle is Green and closes above the Base High.
R Sell EG: Green Base candle, and the very next candle is Red and closes below the Base Low.
E-Regular engulfing, three or more candles
ER Buy EG: Red Base candle followed by a run of consecutive Green candles. The run must contain
at least 2 Green candles, and confirmation happens when one of them closes above the Base High.
A single Red candle before confirmation cancels the run. Doji candles are skipped: they neither
count toward the run nor break it.
ER Sell EG: the mirror image, with a Green Base and a run of at least 2 Red candles, one of
which closes below the Base Low.
If the very first candle after the Base already closes through it, that is by definition a
Regular pattern, so E-Regular requires the second candle or later to break the level. One Base
candle can never produce both.
Type 1, the same four patterns plus a liquidity sweep
Type 1 adds one requirement: before the close breaks through one side of the Base candle, price
must have traded through the opposite side.
T1 R Buy EG: the Confirm candle's Low reaches at or below the Base Low.
T1 R Sell EG: the Confirm candle's High reaches at or above the Base High.
T1 ER Buy EG: at least one Green candle of the run reaches at or below the Base Low.
T1 ER Sell EG: at least one Red candle of the run reaches at or above the Base High.
Any candle of the run can satisfy the sweep, including the Confirm candle itself. The sweep is
always measured against the Base candle, never against another candle in the run.
HOW AN OVERLAP ZONE IS BUILT
Step 1. A pattern confirms and is tracked from then on.
Step 2. The pattern breaks. A Buy Engulfing breaks when a Red candle CLOSES below its Base Low.
A Sell Engulfing breaks when a Green candle CLOSES above its Base High. A wick through the level
is not enough; the close has to settle beyond it.
Step 3. The script looks for an engulfing pattern in the opposite direction whose confirmation
lands on the breaking candle, or as close before it as possible, and whose zone shares both time
and price with the broken one. Where several candidates exist, the one closest to the break is
taken, because that is the one that actually represents the handover.
When all three steps line up, one zone is drawn: the price range of the Base candle of the
pattern that took over, running from that Base candle to its Confirm candle.
The eight resulting types are R Buy EG Overlap, R Sell EG Overlap, ER Buy EG Overlap, ER Sell EG
Overlap and the four Type 1 versions of the same. The type always describes the pattern that
took over, because that is the zone on your chart.
OVERLAP STRENGTH
Strength is the share of the drawn zone that sits inside the price range of the broken zone.
100 percent means the whole zone is shared, which is the tightest possible confluence. A small
number means the two structures barely reach each other. The figure is appended to each label,
and Minimum Overlap Strength lets you discard anything below a level you set. That threshold
applies to the chart, the summary table and the alerts together, so what you see and what you
are notified about never disagree.
READING THE CHART
Each zone is filled in two tones, and the split is the whole point:
- The part that shares price with the broken zone is drawn in the direction colour, green for a
Buy Overlap and red for a Sell Overlap, with a solid border. This is the confluence.
- Whatever is left over is drawn in neutral yellow with no border.
So the colour split you see is the strength figure, shown rather than stated. A zone that is
almost entirely green is strong. A zone with a thin green sliver and a large yellow body is
weak, and the percentage will say so.
Each zone carries a label with its type and strength, placed below a Buy Overlap and above a
Sell Overlap so it points at its own zone.
A summary table in the corner counts what was found in the current scan window, split by Buy and
Sell. Types you have switched off are still counted, so the table always reflects what the market
printed rather than what is currently on screen. Zones rejected by the strength threshold are not
counted, because that threshold decides what qualifies as a zone at all.
SETTINGS
Scan
- Scan Length: how many closed candles are scanned backwards. The running candle is always
excluded.
- Minimum Overlap Strength: the percentage a zone must reach to qualify.
Pattern Types
- An individual switch for each of the eight types.
Zone Style
- Separate colours for the shared area and the remaining area, on both the Buy and Sell side.
Labels
- Show Labels, Show Strength in Label, Label Size, and Label Distance from Zone as a percentage
of the zone height. Increase the distance on noisy charts so labels clear the candles.
Summary Table
- Show, position and size of the corner table.
ALERTS
Eight alert conditions are available, one per type:
R Buy EG Overlap, R Sell EG Overlap, T1 R Buy EG Overlap, T1 R Sell EG Overlap, ER Buy EG
Overlap, ER Sell EG Overlap, T1 ER Buy EG Overlap, T1 ER Sell EG Overlap.
An alert fires on the candle that completes the handover. Each message carries the type, the
symbol, the timeframe and the closing price. The same messages are also sent through the alert
function, so the "Any alert() function call" alert type can deliver every zone through a single
alert.
All alerts are evaluated only after a candle has fully closed.
If you read the source, note that the chart and the alerts are two separate paths. The chart is
rebuilt by scanning history backwards on the last bar, while the alerts keep a running list of
confirmed patterns and test each closed candle against it. Two paths are used because rescanning
the whole history on every bar would be far too slow, and a running list cannot redraw the past.
Both apply exactly the same rules and the same strength threshold, so they always agree.
REPAINTING
This script does not repaint.
- Detection reads confirmed candles only. The scan starts one bar behind the latest bar, so the
candle that is still forming is never part of any calculation.
- Every alert signal is written so that it can only become true once a candle has finished. Price
moving inside an open candle cannot make a signal appear and then disappear.
- Zones are rebuilt on the last bar from confirmed history. A drawn zone does not move, change
colour, change type or change its strength figure afterwards. It only leaves the chart when it
falls outside the Scan Length window.
When you create an alert, TradingView may show a caution banner saying the indicator can repaint.
That banner appears automatically for any script that uses the built in bar state variables, no
matter how they are used, because the platform cannot check the intent behind them. This script
uses them for the opposite purpose: one of them is what restricts every signal to bar close, and
the other is what redraws the zones efficiently on the final bar. Choosing "Once Per Bar Close"
when creating the alert is still recommended.
NOTES AND LIMITATIONS
- These zones are rare by design. Three separate conditions have to line up, so long stretches
with nothing on the chart are normal and expected. If you want to see more, lower the strength
threshold before raising the scan length.
- Scan Length is capped lower than in a plain pattern scanner. Every candidate pattern has to be
followed forward for a break and then matched against opposing patterns, which is far heavier
than simply detecting a pattern. The cap keeps the script responsive on slower machines.
- A zone whose Base candle falls outside the scan window will not appear even if the handover
itself was recent. If zones seem to be missing, raise the Scan Length before changing anything
else.
- For alerts the number of patterns tracked at once is capped and the oldest are released first.
In practice patterns break or age out long before this matters.
- Detection is purely structural. It reports where control changed hands and how much the two
structures shared. It does not rank zones beyond that, measure what happened afterwards, or
produce entries, targets or stops.
- Doji candles are treated as neutral by design. They never act as a Base candle and never break
an E-Regular run. On symbols and timeframes that print many Doji candles this makes runs
slightly more tolerant than a strict same colour rule would be.
HOW TO USE IT
A zone marks an area where one side committed, was proven wrong, and was immediately replaced by
the other side. Traders commonly watch these areas for reactions when price returns to them,
particularly the shared portion, since that is the part both structures agreed on.
The strength figure is there to let you be selective. Starting at zero shows everything so you
can see how the tool behaves on your symbol and timeframe, and raising it narrows the output to
the tighter confluences.
Type 1 zones are worth separating out. There the pattern that took over first grabbed liquidity
and only then confirmed, which is a different sequence from a clean takeover.
These are reference areas, not entry signals. Use them alongside higher timeframe structure, your
own support and resistance mapping, and proper risk management.
DISCLAIMER
This indicator is a pattern detection tool. It is not financial advice and it makes no claim
about profitability. Trading involves risk. Always apply your own analysis and risk management.
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