What is a bearish Engulfing Pattern
A Bearish Engulfing pattern is the exact opposite to the Bullish Engulfing Pattern. This pattern indicates an increase of selling pressure by market participants.
What Is Happening
- The first candle is a bullish candle; price has closed higher than it’s open.
- The second candle engulfs the first as the price completely retraces the gains made by the previous candle.
What do we learn
The key takeaway from seeing this pattern is that the gains made by the first candle are significantly retraced by the second candle.
It is important to note that the pattern does not necessarily have to look exactly as it does above. The key characteristics is that you have a bullish candle; one where the open is higher than the close being re-traced by the following candle.
Learning from experience
The more times you spend analysing the markets in this way the more you’ll learn to notice these patterns. It’s like going to the gym or learning a martial art. Progress does not come from going to your first session it comes from continued practice. Take this approach with everything and you’ll always succeed – I hope that’s given some motivation.
Practicing Your Craft
It’s important to allocate a portion of your time each day just looking over charts and to understand whats happening. As mentioned in previous article (Japanese candlestick; Limitations) the chart can only tell you what has happened. The rest is you weighing up the probability to decide what could happen.