Bearish Engulfing
Candlestick PatternsA two-candle bearish reversal pattern where a large red candle completely engulfs the body of the preceding green candle. It signals strong selling pressure after a rally.
What Is a Bearish Engulfing Pattern?
The bearish engulfing is the mirror image of the Bullish Engulfing. It forms at the top of an Uptrend and consists of two candles. The first is a small green (bullish) candle. The second is a large red (bearish) candle that completely engulfs the first candle's body, opening above the prior close and closing below the prior open.
This pattern shows sellers overpowering buyers in a single session, signaling a potential trend reversal.
How to Trade It
A bearish engulfing at a known Resistance zone on USD/JPY provides a strong short entry. Traders enter at the close of the engulfing candle with a stop above its high. Targets can be the next support level or a measured move based on the engulfing candle's range.
Higher-timeframe bearish engulfing patterns (daily, weekly) carry significantly more weight than those on intraday charts.
Strengthening Factors
Several factors make a bearish engulfing more reliable: (1) the engulfing candle has above-average volume, (2) it forms at a resistance level tested multiple times, (3) the engulfing candle also breaks a short-term trendline, or (4) it appears after an extended rally with overbought oscillator readings. Trading without at least one additional confluence increases the risk of entering a failed reversal.
Related Terms
Bullish Engulfing
A two-candle bullish reversal pattern where a large green candle completely engulfs the body of the preceding red candle. It signals strong buying momentum after a decline.
Evening Star
A three-candle bearish reversal pattern consisting of a large green candle, a small-bodied candle, and a large red candle. It signals the end of an uptrend.
Dark Cloud Cover
A two-candle bearish reversal pattern where a red candle opens above the prior green candle's high and closes below its midpoint. It warns of weakening bullish momentum.
Shooting Star
A bearish reversal candlestick with a small body at the bottom and a long upper wick. It appears at the top of an uptrend, showing that buyers were overwhelmed by sellers.