Bearish Engulfing Candlestick Pattern
A Bearish Engulfing candlestick pattern is a bearish reversal candlestick pattern. So when all the requirements are met for a Bearish Engulfing candlestick pattern, I know that the uptrend for the stock's share price is most likely over or close to over.
Investors and traders alike are enjoying an uptrend in a stock's share price, and think the jubilance continues is going to continue as the next candlestick pattern starts off with a gap-up at the beginning of the trading period. But that gap-up is met with a lot of selling pressure and the share price continues to decline throughout the trading session and eventually closes below the previous candlestick's real body.
The development of this candlestick pattern indicates it is time to lock in some profits if you are currently sitting on gains. Otherwise, those gains will most likely begin to erode over the next several trading sessions. Gains tend to erode very rapidly during a downtrend, therefore quick action is often needed once this candlestick pattern is identified.
If you are not sitting on gains, either be ready to sit through a consolidation period or take the loss. It depends upon your personal time-frame, financial position and other factors like tax gain/ loss harvesting.
Listed below are the requirements for a Bearish Engulfing candlestick pattern.
- A Bearish Engulfing candlestick pattern always has a red colored real body
- It opens above the preceding candlestick's real body and closes below it, appearing to "engulf" the previous candlestick
- It is not necessary to "engulf" the upper and/or lower shadows of the previous candlestick too, only the real body is required
Characteristics & Observations
These are some of the characteristics of Bearish Engulfing candlestick patterns, as well as some of my observations......
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