Bearish Engulfing Pattern

AAA

DEFINITION of 'Bearish Engulfing Pattern'

A chart pattern that consists of a small white candlestick with short shadows or tails followed by a large black candlestick that eclipses or "engulfs" the small white one.

Bearish Engulfing Pattern

INVESTOPEDIA EXPLAINS 'Bearish Engulfing Pattern'

As implied by its name, a bearish engulfing pattern may provide an indication of a future bearish trend. This type of pattern usually accompanies an uptrend in a security, possibly signaling a peak or slowdown in its advancement. However, whenever a trader analyzes any candlestick pattern, it's important for him or her, before making any decisions, to consider the prices of the days that precede and follow the formation of the pattern.

RELATED TERMS
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as ...
  2. Outside Reversal

    A price chart pattern in which a security's high and low prices ...
  3. Dark Cloud Cover

    In candlestick charting, a pattern where a black candlestick ...
  4. Bearish Harami

    A trend indicated by a large candlestick followed by a much smaller ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Harami Cross

    A trend indicated by a large candlestick followed by a doji that ...
RELATED FAQS
  1. What are the most common Bearish patterns used by traders?

    The bearish engulfing pattern may occur at the top of a longer-term uptrend or a corrective retracement during a downtrend. ... Read Full Answer >>
  2. Why is the Dark Cloud Cover pattern important for traders?

    The dark cloud cover pattern is important for traders as a possible signal of market reversal to the downside. It is not ... Read Full Answer >>
  3. How do I create a trading strategy after spotting a Dark Cloud Cover pattern?

    A trader can create a simple trading strategy after spotting a dark cloud cover pattern, a bearish indicator of a possible ... Read Full Answer >>
Related Articles
  1. Charts & Patterns

    The Basic Language Of Candlestick Charting

    If you want to use candlestick charting to get a sense of where a stock is headed, you need to learn how to read this unique charting language.
  2. Charts & Patterns

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  3. Forex Education

    Candlestick Charting: Perfecting The Art

    Take a look at continuation patterns and how they can confirm or deny trends.
  4. Charts & Patterns

    Candlesticks Light The Way To Logical Trading

    Crowd psychology is the reason this technique works. Find out how to make it work for you.
  5. Active Trading

    Candlesticks And Oscillators For Successful Swing Trades

    Take advantage of short-term price moves by pinpointing reversals.
  6. Chart Advisor

    Traders Look To Dividend Funds (VIG)

    When uncertainty creeps into the mind of an active trader it is not uncommon for this type of person to turn toward the safety of dividends.
  7. Trading Strategies

    Enter Trades Ahead Of The Emotional Crowd

    Traders profit in highly competitive markets by shifting their strategies backward or forward, entering positions ahead of or behind the emotional crowd.
  8. Chart Advisor

    4 Bullish Flag Patterns You Should Trade Now

    Here are four stocks with flag patterns, highlighting the various ways to trade this chart pattern.
  9. Chart Advisor

    These Transportation Stocks Are at a Crossroads

    These shipping and railroad stocks are testing resistance. A break above signals an emerging uptrend; a break lower, a continuation of the downtrend.
  10. Technical Indicators

    Trade This High Probability Bollinger Band Pattern

    Bollinger Band box patterns set up profitable opportunities when trends give way to well organized trading ranges.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center