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Written by Nathalie Okde
Fact checked by Rania Gule
Updated 13 June 2025
The Bearish Engulfing candlestick pattern is one of the most popular and effective reversal patterns in technical analysis.
Whether you're trading forex, stocks, or cryptocurrencies, recognizing this pattern can help you spot moments when bullish momentum fades and sellers take control.
In this article, we’ll break down what the bearish engulfing pattern is, how to identify it, and most importantly, how you can use it to make smarter trading decisions.
The Bearish Engulfing pattern is an effective candlestick reversal pattern signaling a potential downtrend.
It forms when a large bearish candle completely engulfs the previous bullish candle.
This pattern is often spotted near resistance levels and is a key trend reversal indicator.
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A bearish engulfing candlestick pattern is a strong bearish signal. It appears after an uptrend or during a price retracement and indicates that sellers have taken control from buyers.
This pattern consists of two candles:
The first is bullish, showing buyers pushing the price up.
The second is bearish, completely engulfing the first one.
This dramatic shift often marks the start of a transition from a bull market to a bear market.
Bearish engulfing candlestick formation is pretty straightforward. After a bullish candle closes, sellers step in aggressively.
Their selling pressure is so intense that the next candle opens higher but closes much lower than the previous candle's open.
This complete engulfing indicates that buyers are losing control.
You'll often spot this pattern at the end of uptrends or during retracements. They appear when buying momentum weakens, and sellers seize the opportunity.
Spotting it near resistance levels makes it even more meaningful.
On the GBP/USD forex currency pair price chart below, the bullish engulfing pattern is clearly visible, where a green candle completely covers the prior red candle.
Despite the red candle having a longer wick, the green candle's body is almost twice as large, signaling strong buying pressure.
Over the next seven days, the price moves upward in a bullish trend before eventually facing a bearish reversal.
Spotting the bearish engulfing candlestick pattern on a Japanese candlestick chart is easier than you think.
To identify the bearish engulfing pattern:
Look for an uptrend or a bullish move.
Find a bullish candle followed immediately by a larger bearish candle.
Ensure the bearish candle completely covers the bullish one.
Check for confirmation signals like RSI divergence or volume spikes.
Although the bearish engulfing candlestick pattern can be spotted across all timeframes, the higher ones tend to offer more dependable signals.
Daily, Weekly, and H4 charts are particularly reliable for traders seeking clearer confirmation.
However, those preferring quicker trades, like scalpers, often rely on M15 or M30 charts where bearish engulfing can still indicate short-term reversals and opportunities.
This pattern often emerges under specific market conditions that highlight weakening bullish momentum:
At or near resistance levels, where sellers become active.
As trends begin to lose momentum, hinting at exhaustion.
During pullbacks in uptrends, often preceding deeper corrections.
After the market has reached overbought conditions, signaling potential reversal.
The Bearish Engulfing pattern shares similarities with other reversal patterns but also has its own unique characteristics.
Understanding the differences helps you choose the right pattern based on market context.
The bearish engulfing pattern forms after bullish momentum and indicates that sellers are taking control, often marking the start of a downtrend.
On the other hand, the bullish engulfing candlestick appears after bearish price action and suggests that buyers are stepping in, potentially leading to an upward reversal.
In simple terms, they are exact opposites, signaling shifts in opposite directions.
The bearish engulfing pattern is made up of two candles. The second bearish candle fully covers the body of the preceding bullish candle, showing strong selling pressure.
On the other hand, the shooting star candlestick pattern is a single candle pattern.
It features a small real body near the bottom with a long upper wick, which signals that buyers tried to push the price higher but failed, resulting in a rejection and possible price drop.
Although both signal bearish reversals, their formation and visual appearance are different.
To use the bearish engulfing candlestick pattern in your trading, you should understand the entry signals, stop-loss and profit targets.
Entering a trade based on the bearish engulfing pattern requires confirmation to avoid false signals.
You should wait for the price to break below the low of the bearish engulfing candle, which strengthens the bearish outlook.
Ideally, this breakdown should be accompanied by increasing volume to confirm seller dominance.
Additional confirmation can come from momentum indicators like RSI moving below 50 or bearish crossovers on moving averages.
This step ensures that the bearish reversal is not a temporary pullback but a real shift in market sentiment.
Effective risk management begins with a proper stop-loss strategy.
For the bearish engulfing candlestick pattern, the safest stop-loss placement is slightly above the high of the engulfing bearish candle.
This positioning protects against sudden price spikes and false breakouts.
If the price unexpectedly moves above this level, it indicates that bearish momentum has likely failed, and exiting the trade helps minimize losses.
Setting profit targets is crucial for maximizing gains. Look at nearby support levels to determine logical exit points.
Once price approaches these zones, partial or full profits can be secured.
Alternatively, using trailing stop loss allows you to lock in profits while staying in the trade if the downtrend continues.
By adjusting the stop as the price moves in favor, traders balance between risk and reward, capturing extended moves without exposing themselves to reversals.
Relying solely on the bearish engulfing candlestick pattern may not always be enough. Combining it with other technical indicators improves reliability.
The Relative Strength Index (RSI indicator) helps confirm overbought conditions, enhancing the bearish signal when RSI drops below 50 after the pattern forms.
Moving Averages, particularly the 50-period or 200-period, provide insight into the overall trend.
A bearish engulfing pattern forming below a major Moving Average strengthens the bearish bias, making the trade setup more convincing.
Together, these indicators create a more robust and confident trading approach.
Bearish Engulfing patterns play a significant role in technical analysis, especially for identifying potential market reversals.
While the Bearish Engulfing pattern is an effective pattern, it should not be viewed in isolation.
Its reliability increases when confirmed by other technical factors like market structure, volume, and supporting indicators.
Generally, traders consider this pattern moderately reliable, especially when it appears at the end of an extended bullish phase.
Accuracy can vary based on timeframe and market conditions.
On higher time frames such as the daily or weekly charts, bearish engulfing patterns tend to perform better, often leading to significant downside moves.
On lower time frames, however, noise and market fluctuations can lead to false signals, so using additional confirmation methods becomes essential.
Yes, improving the accuracy is possible by combining the bearish engulfing candlestick pattern with other tools.
Using momentum indicators like RSI to confirm overbought conditions, looking for bearish divergence, and checking volume for strong seller activity all contribute to filtering out weaker setups.
Furthermore, patterns forming at major resistance levels or in conjunction with bearish trends tend to deliver better results.
Success rates fluctuate depending on the market and timeframe.
However, studies show that the bearish engulfing pattern has a win rate between 50% to 60% when used correctly with confirmation.
As with any trading tool, managing risk and having a clear plan is crucial to capitalize on its potential.
The bearish engulfing candlestick pattern offers the below benefits:
Easy to identify and suitable for beginners.
Provides early warnings of possible trend reversals.
Applicable across various markets and timeframes.
Can be combined effectively with other technical indicators.
Useful in spotting exhaustion points near resistance levels.
Despite its benefits, the bearish engulfing candlestick pattern has the below limitations:
Can produce false signals, especially in sideways markets.
Requires confirmation to improve reliability.
Not always followed by a strong or sustained downtrend.
Should not be used alone without broader market analysis.
Success depends on trader discipline and proper risk management.
The bearish engulfing candlestick pattern is one of the most effective candlestick patterns for downtrend confirmation.
Easy to spot and rich in information, it is invaluable when combined with other tools in technical analysis.
By understanding when and how to use it, you can confidently spot potential trend reversal indicators and enhance your overall trading strategy.
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A bearish candle, especially in this pattern, usually signals a sell.
Yes, when used with a proper Bearish Engulfing confirmation strategy and combined with risk management techniques.
Typically yes. The bearish candle should be a contrasting color (often red , blue, or black) to highlight the market shift.
It's one of the strongest, but combining it with others like the Shooting Star enhances reliability.
Yes, it consists of two candles, bullish followed by bearish.
Yes, but the body of the bearish candle should engulf the body of the bullish candle. Wicks are less important for confirmation.
SEO Content Writer
Nathalie Okde is an SEO content writer with nearly two years of experience, specializing in educational finance and trading content. Nathalie combines analytical thinking with a passion for writing to make complex financial topics accessible and engaging for readers.
Market Analyst
A market analyst and member of the Research Team for the Arab region at XS.com, with diplomas in business management and market economics. Since 2006, she has specialized in technical, fundamental, and economic analysis of financial markets. Known for her economic reports and analyses, she covers financial assets, market news, and company evaluations. She has managed finance departments in brokerage firms, supervised master's theses, and developed professional analysis tools.
This written/visual material is comprised of personal opinions and ideas and may not reflect those of the Company. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. XS, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same. Our platform may not offer all the products or services mentioned.
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