How To Trade Bearish Engulfing Patterns
Bearish Engulfing pattern is the exact opposite of the Bullish Engulfing Pattern. It is a bearish reversal candlestick pattern indicating that a stock is about to turn downward. Here's how the bearish engulfing pattern looks like.
Bearish Engulfing pattern happens on an uptrend and is a very negative signal for a stock. The second day (down day) complete engulfs the first day (up day). The longer the body of the second day indicates extra bearish. Also, if a stock go down on the second day with higher than usual trading volume, that also indicates extra bearish.
Let's look at few real examples. As you can see, the bearish engulfing pattern shows up on uptrends. After the pattern is formed, you can see the stocks tumbled in the next few weeks. So the next time you see this pattern, be cautious.
You can use our Candlestick Screener to scan for stocks that with the bearish engulfing pattern.