Beraish Engulfing Pattern is one of the strongest patterns that generates a selling signal in candlestick charting and is one of my favorites when I short stocks. The following figure shows how the Bearish Engulfing Pattern looks like.
The following conditions must be met for a pattern to be a bearish engulfing.
- The stock is in a uptrend (short term or long term)
- The first candle is a white candle (up day) and the second candle must be black (down day)
- The body of the second candle must completely engulfs the first candle.
The following conditions strengthen the sell signal
- The trading volume is higher than usual on the engulfing day
- The engulfing candle engulfs multiple previous down days.
- The stock gap down or trading higher the next day after the bearish engulfing pattern is formed.
Stock Chart for YGE
The stock formed a bearish engulfing pattern on 10/15 and another one at 11/9. The stock lost almost 30% of value since the bearish engulfing pattern was formed. So if you were shorting this stock, you just made 30% in a month and half.
Please note, in reality it is not easy to sell a stock at its highest price and buy it back at its lowest. The good news is that you don’t need to sell at its peak to make a good fortune in the stock market.
Click the following link to get a list of bearish engulfing pattern stocks for today.
