A bearish engulfing pattern is a bearish body that covers the entire body of the previous bullish candle after an advance. It raises a question about the advance: a lower close supports it and a close above the pattern high answers it the other way.
What is the bearish engulfing candlestick pattern?
A bearish engulfing pattern is a two-candle reversal pattern that forms after an advance. The first candle is bullish and extends the advance. The second is bearish and its body covers the entire body of the first: it opens at or above the first close and finishes below the first open. In one session, sellers take back all of the previous session's net gain and more.
The pattern is read as a warning that buyers may be losing control near the highs. It is not a statement about the company and not a measure of how far a decline may go. It records one session in which supply clearly outweighed demand at prices the stock had just reached.
How to identify a bearish engulfing pattern
Compare the real bodies, not the wicks, and confirm the setting before naming the pattern. The two candles only form a bearish engulfing pattern after an advance; in a decline the same pair is simply another down session.
- An advance comes first: higher closes over several sessions or a clear uptrend.
- Candle one is bullish: it closes above its open.
- Candle two is bearish: it closes below its open.
- Candle two opens at or above candle one's close and closes below candle one's open, so its body covers candle one's body. Stricter definitions ask for the second body to extend beyond the first at both ends.
- The wicks of candle one do not count. A second candle whose range also exceeds both ends of the first range is an outside bar as well.
| Candle | Open ($) | Close ($) | Body ($) | Color |
|---|---|---|---|---|
| First | 48.60 | 49.35 | 0.75 | Bullish |
| Second | 49.50 | 48.25 | 1.25 | Bearish |
The second candle opens $0.15 above the first close and closes $0.35 below the first open, so its body covers the first body at both ends.
Trend context: the advance it needs
The pattern only has meaning at the end of a rise. In the figure, closes climbed 13.7% over the ten sessions before the first candle, and the engulfing session forms at the highest prices of the move. A bearish engulfing pattern near a prior swing high, at the top of a range or after a run far above the 50-session moving average has more to say than one in the middle of a choppy range.
In a downtrend, a bearish engulfing session after a brief bounce reads as the decline resuming, a continuation rather than a reversal. Within a strong uptrend, bearish engulfing sessions are common during ordinary pullbacks; a single one does not end the trend, and the higher lows of the trend remain the levels that matter.
The size of the advance matters too. A steep, extended run leaves more room for profit taking than a slow climb, and a bearish engulfing session after such a run is the kind of shift chartists watch most closely.
Confirmation: a lower close next
A bearish engulfing pattern is confirmed by what follows. The common test is a next-session close below the engulfing candle's close; a stricter one is a close below the engulfing candle's low or below the nearest support level.
- Confirmed: the next session closes below the engulfing close. In the figure the next close is $47.60, under the engulfing close of $48.25.
- Unconfirmed: the next session closes higher but remains below the pattern high. The warning stands, but sellers have not followed through.
- Invalidated: a close above the pattern high, the higher of the two candles' highs ($49.80 in the figure). Buyers have absorbed the selling and the bearish reading has failed.
Confirmation adds evidence; it does not make the outcome certain. Decide in advance which close you will treat as confirmation and which as invalidation, and keep risk decisions in your own plan.
Volume analysis for a bearish engulfing pattern
Volume measures how much selling stood behind the reversal. A bearish engulfing session on volume well above the recent average shows broad selling at the highs. On light volume the pattern may reflect a lack of buyers for one session more than a wave of sellers.
- In the figure, the engulfing session trades 2.0 times the average volume of the previous ten sessions, and the confirming session 1.3 times.
- Rising volume in the late stage of an advance followed by the heaviest volume on the engulfing day can mark distribution, where holders sell into strength.
- A follow-through decline on falling volume is weaker than one on steady or rising volume.
- Look for scheduled events. Earnings, guidance updates and index rebalancing can produce large candles and heavy volume that have their own explanation.
Failure examples and invalidation
A bearish engulfing pattern fails when buyers lift the stock back above the pattern high. In the hypothetical failure below, the pattern forms on light volume within a strong advance, the next session closes higher, and the session after that closes above the pattern high on heavier volume; the advance then resumes.
- A strong uptrend with rising moving averages, where pullbacks of a session or two are routine.
- An engulfing candle with a long lower wick, showing buyers stepping in before the close.
- Support just below, such as a recent breakout level, that buyers defend the next day.
- Light volume on the engulfing session compared with the sessions before it.
Note the pattern high when the pattern forms. A close above it does not prove that the advance continues, but it does show that the bearish reading was wrong at that point.
Look-alikes: dark cloud cover, harami and outside bar
The closest relatives differ in how much of the first candle the second one takes back and in which part of the candles the rule compares. Each has a bullish mirror image that forms after a decline.
| Pattern | Second candle | Compares |
|---|---|---|
| Bearish engulfing | Bearish body covers the whole prior bullish body | Bodies |
| Dark cloud cover | Opens above the prior close and closes below the midpoint of the prior body, but above its open | Bodies |
| Bearish harami | Small body inside the prior long bullish body | Bodies |
| Outside bar | Higher high and lower low than the prior session, either color | Ranges |
| Bullish engulfing | Bullish body covers the prior bearish body, after a decline | Bodies |
Dark cloud cover is the partial version: the second candle drives below the midpoint of the first body but leaves part of it intact, so many chartists wait for a close below the first candle's open before treating it like an engulfing pattern. A shooting star is a related single-candle warning at highs, built on a long upper wick rather than a large body.
Research checklist
A consistent routine keeps your notes comparable across stocks. In Stock Charts, use a 3M or 6M range to read individual daily candles, keep the volume pane open and add the 50-session moving average for trend context. The candles are yours to read: TradeClever does not identify candlestick patterns.
- Measure the advance before the pattern in sessions and percent.
- Check that the second body covers the first and write down both opens and closes.
- Mark the pattern high as the invalidation level.
- Compare the engulfing session's volume with its recent average.
- Mark the nearest support below the pattern.
- Record the next close and label the pattern confirmed, unconfirmed or invalidated.
- Keep the failures in your records as well as the confirmations, so your view of the pattern rests on all of your examples.
Sources
- Steve Nison, Japanese Candlestick Charting Techniques (New York Institute of Finance, 1991)
Read our data and methodology notes for calculation context. This guide explains research tools and observations. It does not recommend a trade or investment.