Technical Glossary / Candlestick Patterns
Bearish Engulfing
An up candle followed by a down candle whose body covers the prior body.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
After a rally, a bullish candle is followed by a bearish candle that opens at or above the prior close and closes below the prior open. The second body engulfs the first. Supply took back the prior period's gain.
How to identify it
Two candles at the end of an advance. The second body is down and completely covers the first body. Colour conventions vary. Compare open and close, not the legend alone.
Bullish reading
A failure back above the engulfing high voids the bearish story. One red candle inside an uptrend is not automatically this pattern.
Bearish reading
At resistance, traders treat a close below the pattern, with the high as the invalidation, as evidence that the last up close was rejected.
Common mistakes
Calling any larger down candle an engulfing. The prior body has to sit inside the new body, and the prior trend should be up.
Limitations
Gaps at the open can create engulfing bars that are really one news print. Check what caused the range before you generalise it.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.