Bearish Engulfing
Pattern: The Bearish Engulfing Candlestick
Pattern is a bearish reversal pattern,It is happening at the top of an
uptrend.The pattern consists of two candlesticks:
.Smaller
Bullish Candle(Day 1)
.Larger
Bearish candle(Day 2)
In
general, the bullish candle real body of
Day 1 is contained within the real body of the bearish candle of Day 2.
The
gapup (bullish sign) on Day 2,but the bulls do not push prices higher before bears taken over and push prices
further below,not only filling in the
gap,down from the day beginning open but also,pushing prices further down the
previous day’s open.
With
the Bearish Engulfing Pattern ,there is an notable change of sentiment from the
bullish gap up in the beginning(open),to the larger bearish real body candle that closed at the lows of
the day.Bears have successfully taken charge for the day and possibly for the
next few days.
In
general, the bullish candle real body of
Day 1 is contained within the real body of the bearish candle of Day 2.
The
gapup (bullish sign) on Day 2,but the bulls do not push prices higher before bears taken over and push prices
further below,not only filling in the
gap,down from the day beginning open but also,pushing prices further down the
previous day’s open.
With
the Bearish Engulfing Pattern ,there is an notable change of sentiment from the
bullish gap up in the beginning(open),to the larger bearish real body candle that closed at the lows of
the day.Bears have successfully taken charge for the day and possibly for the
next few days.
The follwing chart of ALAGABAD BANK(ALBK)
explains Bearish Engulfing Pattern happening in daily chart.
Bearish
Engulfing Sell Signal
Three methods for selling using the Bearish Engulfing
Pattern are listed below in the order of most aggressive to most conservative.
1.Sell at the close of the Day 2. An even stronger
indication to sell is given when there is substantial increase in volume that
accompanies the large down move in price.
2.Sell on the day after the Bearish Engulfing Pattern
occurs;by waiting until the next day to sell,a trader is sure that the bearish
reversal pattern is for real and not for one day happening. In the chart above the
trader would probably entered on the day after the Bearish Engulfing Pattern because selling
continued.(because next candle is black or red)
3.Usually traders wait for other technical signals such
as a price break below the upward support line before entering a sell
order.However in the case of ALBK above
sell signal happens on the next day after Bearish Engulfing Pattern occurred
because the trend line break below support after Bearish Engulfing Pattern
happening.
