Bearish Engulfing

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Engulfing


A Bearish Engulfing pattern is a two-candlestick reversal pattern seen in technical analysis. It typically occurs at the top of an uptrend and indicates a shift in momentum from buyers to sellers. The first candlestick is a white or green candle that reflects an upward move, while the second candlestick is a black or red candle that closes lower than the previous day's open – engulfing the previous day's body. This pattern often signals that a downtrend will follow soon after.

Typically, this pattern is made up of a large red body with no upper shadow and engulfs the entire white body of the prior session’s candle. This indicates strong selling pressure that has overwhelmed buyers’ attempts to push prices higher. After such a strong signal, traders can expect lower prices in following sessions. A confirmation of further downward price action may occur two or three days later when prices close below the low of the prior bearish session.

The Bearish Engulfing pattern signals an increase in market volatility and increases chances of trend reversal as well as potential opportunity for short-term traders to take advantage of bearish price movements by opening short positions – betting on prices to drop during downtrends and make profits from falling markets.

This pattern can also be used to detect possible reversals in long-term trends as it may indicate significant shifts in longer-term sentiment among investors. Traders should always wait for confirmation before acting on any bearish signals as there are cases when this formation fails to generate substantial downside moves despite appearing convincing at first glance. Additionally, traders should pay attention to volume levels which should be increasing when this formation is present because volume confirms strength behind price movements and helps distinguish real trend reversals from false ones.

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