Bearish Engulfing Pattern

What are Bearish Engulfing Candlestick Pattern ?

Bearish Engulfing Pattern is a reversal candlestick pattern which is bearish in nature and appears at the end of an up trend. It is a complex pattern made of two candlelines. The first candle is bullish in nature and the second is bearish in nature.

It has its name because the real body of the second candle engulfs the real body of the first candlestick. It is one of the important pattern, which you should give attention to.


How Bearish Engulfing Candlestick Pattern are formed?

Bearish Engulfing Pattern is formed by the combination of two candlesticks. The first one is a rising white candle and the second is the reversal black candlestick.

The market is in an up trend. The price opens at almost low of the day and as usual the buyers continue to buy. At the end of the session the price closes almost at the top for the time period. This results in the formation of bullish white candle, which is the first candle of the Bearish Engulfing Pattern.

On the next day or next time period the price opens above the high of the real body of the previous bearish candlestick. Buyers are making new long trades. Those who are already long in the market are also adding to their position. But the smart money creeps in and starts unloading their position to these ignorant buyers. As the supply increases the momentum decreases and the prices starts falling. As the prices fall the bulls are happy to buy more at a lower price. This facilitates bears to distribute more shares at higher price.

The supply continues to increase more than the demand, pushing the price down. As the new buyers are all in loss, they also start to sell their position to minimize their losses. Sensing the change in the trend, the old bulls starts booking profits in their long positions. As the bears continue to increase their short position, the price falls further and at the end of the session the price closes below the real body of the previous candle. This results in the formation of bearish black candle, which is the second candle of the Bearish Engulfing Pattern and it engulfs the real body of the previous candlestick.

Bearish Engulfing Pattern is a major bearish reversal candlestick pattern. They occur at the top of an up trend.


    For this to occur...
  • There has to be a clear up trend, whether major or minor.
  • The first candle is usually a white candle signifying an ongoing up trend and the second candle is always a black candle.
  • The second day black candle's real body engulfs the first day white candle's real body.



Study the chart given below. 

Bearish Engulfing Candlestick Pattern of Candle Charting for Technical Analysis in Stock Trading


What is the significance of Bearish Engulfing Candlestick Pattern?

It is obvious that the sellers are taking over the control of the market. It signifies that the top reversal of the up trend is unveiling.


    Its importance increases...
  • If the first day's real body is very short and second day's real body is very long.
  • If the second day is accompanied by high volume
  • If it is a minor up trend in a major down trend.
  • If the second day's real body engulfs both body and shadows of the first day, that is sessions complete move.
  • If the second day's real body engulfs more than one previous day's real bodies.


It is a more powerful signal than Dark Cloud Cover Pattern because the action of bears is more evident in Bearish Engulfing Pattern than in Dark Cloud Cover Candlestick Pattern.

The significance of this Bearish Engulfing Pattern increases if the second day's opening is above a resistance area and the close is below the resistance area. If the second candle is a black marubozu or with a shaven head or shaven bottom, it speaks of the more bearishness of the market. Its importance is even more if it is accompanied by increased volume.

If you are holding a long position, Bearish Engulfing Pattern should alert you to take action the next day. One can cover her long position below the low of the second day's black candle.

A short trade can be entered below the low of the second day's black candle. Place a buy on stop order above the high of the pattern to limit your loss, in case the up trend continues to go up.

Sometime first day's real body can be black, if it is a very small body. First day can also be a doji. 


Bearish Engulfing Candlestick Pattern of Candle Charting for Technical Analysis in Stock Trading

Bearish Engulfing Candlestick Pattern may occur along an up trend without a reversal. It only exhibits a minor profit booking by bulls.



Counter part of this pattern in a candle chart is Bullish Engulfing Candlestick Pattern.


Related Readings

There are many more complex candlestick patterns used in stock analysis. Some of them are listed below. You may click on the name of each pattern listed below to learn and understand more about them.


  • Dark-cloud cover
    Dark cloud cover is a bearish reversal candlesticks pattern. They occur at the top of an up trend.
  • Piercing Pattern
    Piercing Pattern is a bullish reversal candlesticks pattern. They occur at the bottom of a down trend.
  • Bullish Engulfing pattern
    Bullish Engulfing Pattern is a major bullish reversal candlesticks pattern. They occur at the bottom of a down trend.
  • Bearish Engulfing pattern
    Bearish Engulfing Pattern is a major bearish reversal candlesticks pattern. They occur at the top of an up trend.
  • Morning star
    Morning Star is a bullish reversal candlesticks pattern. They occur at the bottom of a down trend.
  • Evening star
    Evening Star is a bearish reversal candlesticks pattern. They occur at the top of an up trend.
  • Morning doji star
    Morning Doji Star is a bullish reversal candlesticks pattern. They occur at the bottom of a down trend.
  • Evening doji star
    Evening Doji Star is a bearish reversal candlesticks pattern. They occur at the top of an up trend.
  • Three white soldiers
    Three White Soldiers is a candlesticks pattern formed by a group of three white candles, which shows the strength of the advancing market.
  • Three black crows
    Three Black Crows is a candlesticks pattern formed by a group of three black candles, which shows the strength of the declining market.
  • Harami
    Harami is a candlesticks pattern, which shows the indecision of the market. In Japanese language, it means, pregnant. It is made of two candles, one containing the other.
  • Gaps
    Gaps are continuation chart pattern, formed by an unfilled space between two trading session. Gaps are referred as Tasuki, meaning window in candlestick charting.
  • Island Formation
    Island Formation is a reversal chart pattern, formed by price action in a group of multiple time period, which is separated from rest of the price action by gaps. It is very reliable with 80% probability.
  • Abandoned Baby
    Abandoned Baby is a reversal chart pattern, formed by price action in a single time period, which is separated from rest of the price action by gaps. It is very reliable with 80% probability.



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