Bearish Engulfing

A bearish engulfing pattern is a two-candle reversal signal. The first candle is bullish (green), and the second candle is bearish (red) with a body that completely "engulfs" the first candle's body — opening at or above the prior close and closing below the prior open. It suggests sellers have overwhelmed buyers and a potential downward reversal may be starting.

Pattern Anatomy

• Candle 1: A bullish (green) candle — buyers were in control
• Candle 2: A bearish (red) candle whose body opens at or above the first candle's close and closes below the first candle's open
• The second candle's body completely covers ("engulfs") the first candle's body
• Wicks don't matter for classification — only the bodies

How to Interpret

• Most significant after a sustained uptrend — signals potential reversal
• The larger the second candle relative to the first, the stronger the signal
• Volume confirmation: higher volume on the engulfing candle adds conviction
• Best when appearing at a known resistance level
• Not reliable in sideways/ranging markets

Expert References

• Steve Nison, Japanese Candlestick Charting Techniques — considers the bearish engulfing one of the most important bearish reversal signals in candlestick analysis
• Thomas Bulkowski, Encyclopedia of Candlestick Charts — found bearish engulfing patterns act as bearish reversals approximately 79% of the time — one of the more reliable candlestick patterns

Controversy & Limitations

• Strict vs. loose definitions — some texts require a gap up on the open, while Engulfy follows standard Nison definitions
• In modern markets with 24/7 electronic trading, true gap-up opens are rarer, making the strict gap-up requirement less practical
• Statistical reliability is relatively strong at approximately 79% — but still not a guarantee and should not be used as a standalone trading signal