Bearish Engulfing
A bearish engulfing pattern is a two-candle reversal pattern where a large red candle completely engulfs the previous green candle's body. It signals strong selling pressure and potential trend reversal at the top of uptrends.
Formation
- 1.First candle is bullish (green)
- 2.Second candle is bearish (red) and larger
- 3.Second candle's body completely engulfs the first candle's body
- 4.Wicks don't need to be engulfed, only the body
Psychology
The pattern shows a dramatic shift in sentiment. Bulls were in control during the first candle, but bears overwhelmed them in the second session, completely erasing the bullish move and pushing lower.
Trading Tips
- ✓More significant with larger second candle
- ✓Best after an extended uptrend
- ✓Enter on close of engulfing candle or next candle open
- ✓Stop-loss above the engulfing candle's high
Confirmation Signals
- →High volume on the engulfing candle
- →Following candle continues lower
- →Located at resistance level
- →Engulfing candle closes near its low
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Common questions about this pattern
It's a two-candle reversal pattern where a large bearish candle completely covers the previous bullish candle's body. It signals strong selling pressure overpowering buyers.
The pattern is most reliable at the top of extended uptrends, especially at resistance levels or psychological price points. Volume should increase on the engulfing candle.
Place your stop-loss above the high of the engulfing candle. This gives the trade room while protecting against pattern failure if price breaks above that high.