Bearish Engulfing Pattern
Candlefocus EditorThe first candle of the bearish engulfing pattern is typically a bullish candle, which shows that the bulls were in control of the price in the short-term, pushing the price up. This is typically followed by a bearish candle with a higher open than the previous candle’s close. The close for the bearish candle is even lower than the open for the previous candle, resulting in a strong signal that the bears are taking control of the price.
The strong bearishness of the bearish engulfing pattern is a signal that the bears have won the battle with the bulls. In order for a bearish engulfing pattern to be formed, both candles in the pattern need to be fairly large. If the candlesticks are small, or if there is a gap between the two candlesticks, it is not considered to be a valid bearish engulfing pattern. Once confirmed, a bearish engulfing pattern is a reliable indication of future bearishness.
In conclusion, bearish engulfing patterns appear on charts when the bears overtake the bulls and are a signal that the price may fall. They should be large and the real bodies of both candles should be visible. This two-candle pattern is a solid indication that bearishness has taken over the market and that prices may continue to fall.