The Bearish Engulfing pattern is a reversal candlestick pattern that signals a potential downtrend. It consists of two candles:
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First Candle: A small bullish candle (white or green)
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Second Candle: A large bearish candle (black or red) that:
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Opens above the high of the first candle
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Closes below the low of the first candle
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Engulfs the entire body of the first candle
Interpretation:
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The Bearish Engulfing pattern indicates that the bears have taken control, and the price may start falling.
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The large bearish candle suggests a strong rejection of the previous uptrend.
It signals a reversal of the uptrend and indicates a fall in prices by the sellers who exert the selling pressure when it appears at the top of an uptrend
This pattern triggers a reversal of the ongoing trend as more sellers enter the market and they make the prices fall.
What Does the Bearish Engulfing Look Like?
Trading Example: 1
Similarly when trading with the Bearish Engulfing pattern, one should remember the below points:
- Prior trend: One should note that the prior trend uptrend
- Pattern: The second candlestick should be bearish and engulfing the body of the first candlestick.
- Stop loss: Stop loss can be placed below at the high where the bearish engulfing pattern occurs.
- Confirmation of the pattern: Also, don’t forget to confirm the signals given by this pattern with other technical
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Live Example
