What Is Bearish Engulfing?
A bearish engulfing pattern is a two-candle reversal signal where a large bearish (red) candle completely engulfs the body of the previous bullish (green) candle. The second candle opens above the first candle's close and closes below its open, indicating that sellers overwhelmed buyers and took control.
How Bearish Engulfing Works
The pattern is most significant when it appears after a sustained uptrend or at a known resistance level. The larger the engulfing candle relative to the previous candle, the stronger the signal. A bearish engulfing on the daily or weekly timeframe carries substantially more weight than on intraday charts, where they occur frequently.
Why It Matters for Traders
Bearish engulfing patterns at key resistance levels, especially when confirmed by high volume and bearish divergence on RSI or MACD, are among the most reliable reversal signals. Many traders use them as the trigger to enter short positions or close existing longs, placing stop-losses above the engulfing candle's high.
