Bearish Engulfing Candlestick Pattern: Theory & Usage
The Bearish Engulfing is a bearish reversal pattern that signals a potential shift from an uptrend to a downtrend. It consists of two candles:
* First Candle : A small bullish (green) candle.
* Second Candle : A larger bearish (red) candle that fully engulfs the body of the previous candle, indicating strong selling pressure.
This pattern suggests that the bulls have lost control and that the sellers are beginning to dominate the market.
How Traders Use It:
Entry Point : Sell when the second candle (bearish) closes below the low of the first candle.
Stop-Loss : Place it above the high of the second candle to limit risk.
Target Price : Estimate the target based on previous support levels or other technical indicators.
The Bearish Engulfing pattern is often used in uptrending markets to identify potential bearish reversals and capitalize on downward price movement.