Outside Bar

An outside bar engulfs the prior range. Its high is higher and its low is lower. The period traded on both sides of the previous period and then closed somewhere inside that wider range. The close decides who finished in control. An engulfing candle is about bodies. An outside bar is about the full high and low.

Two bars. The second sticks out above the first high and below the first low. A bar that breaks only one side is not outside.

An outside bar that closes near its high, after taking the prior low, shows a failed push down and acceptance up. Traders treat the close above the prior high, and the outside low as risk, as the bullish case.

An outside bar that closes near its low, after taking the prior high, shows a failed push up. The outside high is the risk on a bearish reading.

Outside bars are range expansion. They are useful when they reverse a level, and noisy when they appear in the middle of nowhere. Always read the close, not just the fact of the engulfed range.

Calling a large candle an outside bar when it did not clear both the prior high and the prior low.

The range is wide by definition, so a stop beyond it is expensive. Many outside bars are news bars that mean-revert the next period.