Mastering Candlesticks: Bearish Engulfing

What is it?

Similar to the One Black Crow, the Bearish Engulfing pattern also closes below the preceding day’s opening candle reflecting the bears have taken back more territory than the bulls gained. However, the big difference between the two is the Bearish Engulfing pattern gaps up at the market open instead of gapping down like the One Black Crow.

Like the One Black Crow pattern, the Bearish Engulfing candlestick patterns have three primary reasons it is particularly bearish:

  • Alternating colors from white to black, at resistance, is a clear signal that the previous bullish momentum has lost steam and it is ready to reverse in the opposite direction.
  • The fact the real body closes below the previous day’s open is a strong signal the bears are going to continue pushing the bulls back.
  • The opening gap as this tells the biggest story; unlike the one-black crow which gaps down, the bearish engulfing pattern gaps up at open. As a last-ditch gasp of the bulls to achieve a push to a higher high.

​Where is it?

You should look for this pattern at known resistance areas. When you identify it in this location, the predictive power is very high.

What Should I Do When I See This Pattern?

  • Tighten any stops you might have in a bullish trade
  • Consider closing any bullish trades
  • Get ready to possibly reverse your position into a bearish trade
  • Watch for additional confirmations of a new bearish trend

Similar to the One Black Crow, if you do enough candlestick analysis, you will start to notice the Bearish Engulfing signals occurring at resistance in a large percentage of bearish swings.

The One Black Crow and Bearish Engulfing pattern are two extremely powerful bearish reversal candlestick patterns. They both occur with a relatively high frequency, and in both cases, they are a great predictor of an impending bearish swing.