Bearish Engulfing Pattern

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.