Exact formation
The second candle marks a higher high and a lower low than the previous one; its entire range contains it.
What is happening in the market
Volatility expands and both extremes are swept away. The close determines which side finished with the advantage.
Where it matters
In a turn it can signal rejection; within noise only reflects expansion. Its color and closure matter.
How to confirm it
Continuity beyond the end consistent with the closure of the outside bar.
When it is invalidated
Breakout of the opposite extreme or immediate return to range.
Common mistake
Call it surround: outside bar compares the entire range, not just the bodies.