Bearish Engulfing
A bearish engulfing is a two-candle reversal pattern where a small green candle is followed by a larger red candle that completely engulfs the previous candle's body. It signals sellers overwhelming buyers.
Understanding the Concept
This pattern works best at resistance levels or after uptrends. The first candle shows continued buying, but the second candle reverses everything—sellers take control and wipe out the gains. It's the bearish mirror of bullish engulfing. The bigger the red candle and the higher the volume, the more significant the reversal. Use this as an exit signal for longs or an entry for shorts. Don't trade it in isolation though; context matters. A bearish engulfing at all-time highs is more meaningful than one in the middle of nowhere.
Real-World Example
Ethereum rallies to $4,000 resistance. Day 1: small green candle closes at $3,950. Day 2: large red candle opens at $4,000 and closes at $3,700, engulfing the previous day. Time to exit or short.
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