The bearish engulfing pattern

The bearish engulfing pattern is one of the best patterns to start with because of the dramatic nature of the bearish second day that appears on the pattern. The pattern involves the bears taking control after an extended period of bullishness, and the trend is definitely one to watch.

Identifying the bearish engulfing pattern

Check out Figure 8-1 for an example of the bearish engulfing pattern.

Leading up to and including the setup day of this pattern, the bulls have been in the driver's seat. On the open of the signal day, the sellers or shorts finally have had enough, and they decide that the price has gone up enough to bring them into the action. They push the price down dramatically and quickly (in one day). But these bears aren't finished with their selling, and the close of the signal day is near that day's low. That will most likely continue — to the point where a downtrend develops — because the sellers aren't done putting pressure on the stock or market.

Figure 8-1:

The bearish engulfing pattern.

Figure 8-1:

The bearish engulfing pattern.

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