The candles of the pattern are ringed. An invented chart, drawn to show the shape. Not market data.
Also searched asbearish engulfing candle · engulfing pattern · outside bar down
How to recognise a bearish engulfing
- A rising candle followed by a falling one.
- The second body fully covers the first body.
- It appears after a rise.
What it is taken to mean
It is read as sellers taking over from the buyers of the previous period, and as a warning that the rise may have stalled.
What traders check next
- Whether the high of the pattern sits at a level that has capped the price before.
- The next candle: does it continue down or reclaim the pattern?
- The high of the two candles, where the reading would be wrong.
Where people go wrong
- Selling a strong up-trend on a single pattern.
- Reading it on a time frame so short that the spread is a large part of the candle.
- Ignoring a scheduled release that produced the candle and may reverse as fast.
Questions people ask
- How is it different from a bullish engulfing pattern?
- It is the mirror image: it comes after a rise and the covering candle falls.
- Does it mean the trend has reversed?
- No. It describes what buyers and sellers did during those candles. Studies of candlestick patterns find that, taken alone, they predict the next move only a little better than chance, if at all. It is one observation to weigh with others.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern or a situation described here says nothing certain about what a price will do next.