What Are Bearish Engulfing Patterns?

Bearish engulfing patterns are the opposite of their bullish counterparts and appear after uptrends. They indicate a potential reversal to the downside. This pattern includes:

• A bullish candle with a relatively small real body.
• A large bearish candle that engulfs the body of the previous candle.

Bearish Engulfing Formation:

• Bulls control the first session.
• Bears take over, pushing the price down and closing below the previous candle’s open.

Engulfing patterns demonstrate shifts in trader psychology and momentum. The larger the engulfing candle relative to previous ones, the more decisive the signal.

Key Takeaways

• Bullish engulfing: Appears in downtrends; signals potential reversal to the upside.
• Bearish engulfing: Appears in uptrends; signals potential reversal to the downside.
• Always trade engulfing patterns within the context of the prevailing trend and wait for confirmation.

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