Bearish Engulfing |
Characteristic of Candlesticks: Reversal
Relevance of Candlesticks: Bearish
Prior Trend of Candlesticks: Bullish
Reliability of Candlesticks : 1st Grade
Confirmation of Candlesticks: Highly Reliable
Candlestick Patterns Key Reference |
Forex Chart (EURUSD)
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DESCRIPTION
Bearish Engulfing is a black body of the bearish candlestick engulfing the previous smaller bullish candlestick body.
The second bearish candlestick is not necessarily to engulf the shadows of the bullish candlestick but to engulf the entire body of the previous small bullish candlestick.
Bearish Engulfing is an top reversal pattern which is highly reliable for sharply reversing a uptrend to an downtrend.
PATTERN RECOGNITION
1. Bearish Engulfing pattern can be identified by a uptrend followed by a top reversal.
2. Refering to above diagram, firstly we will see a small bullish candlestick at the top of the uptrend.
3. Finally we will see a bearish candlestick which engulf the first bullish candlestick entire body.
EXPLAINATION
When Bearish Engulfing pattern is formed at the top of a uptrend with a gap followed by a reversal is extremely powerful indication of a change in sentiment.
The second candlestick indicate bear strength with a closing price at or below the previous candlestick open price. That shows that the the bear is in control and the bull is losing its strength.
The 1st grade reversal patterns are the most reliable group of reversal patterns that seldom require any confirmation.
POINT TO NOTE
The size of the body is important on the first and second candlesticks. The Bearish Engulfing pattern is identified by a small bullish real body (can be even a doji or doji with small body) on the first candlestick.
The second candlestick is identified by a long bearish real body which indicates that the bull lost its command and bull is now in control.
The longer the body of the second candlestick indicate the stronger change in sentiment. That means the second candlestick of the Bearish Engulfing pattern will engulfs the past two or more small bullish candlesticks.
The uptrend reversal confirmation is required on the third candlestick. The confirmation is needed in a form of a bearish candlestick with a large gap downward or a lower close on the third candlestick.
CANDLESTICK PATTERNS KEY REFERENCE
Irrespective of Color (Can be bullish or bearish) |
Uptrend |
Consolidation |
Downtrend |
ANTICIPATED DIRECTION OF TREND
Lighter Arrow = Lower Probability
Solid Arrow = Higher Probability
More Likely to go sideway, Less likely to rally
|
More likely to rally, Less likely to go sideways
|
More likely to go sideway, Less likely to fall
|
More likely to fall, Less likely to go sideways |
