A bearish engulfing pattern forms when a green (up) candle is immediately followed by a red (down) candle whose body fully covers the body of the prior green candle. It shows sellers overpowered the previous session's gains decisively.
Why it matters
- —One of the more reliable two-candle reversal signals, especially when it forms at a known resistance level.
- —The larger the red candle relative to the green one it engulfs, the more decisive the signal.
- —Confirmation from above-average volume on the red candle strengthens the case for a genuine reversal.
How to read it
| At resistance, after an uptrend | Strong bearish reversal signal |
| Mid-range | Weaker, lower-conviction signal |
| On high volume | Higher-confidence reversal |