About Lesson
- A bearish engulfing pattern is a technical chart pattern that signals lower prices to come.
- The pattern consists of an up candlestick followed by a large down candlestick that eclipses or “engulfs” the smaller up candle. The pattern can be important because it shows sellers have overtaken the buyers and are pushing the price more aggressively down (down candle) than the buyers were able to push it up (up candle).
- A bearish engulfing pattern can occur anywhere, but it is more significant if it occurs after a price advance. This could be an uptrend or a pullback to the upside with a larger downtrend.
- The real body—the difference between the open and close price—of the candlesticks is what matters. The real body of the down candle must engulf the up candle.
- The pattern has far less significance in choppy markets.
