I recently started to learn more deeply about candlestick patterns, especially about what engulfing is. So bearish engulfing is one of the quite powerful signal patterns if you can recognize it correctly on the chart.

Basically, an engulfing occurs when there are two consecutive candlesticks, where the body of the first candlestick is completely covered or wrapped by the body of the second candlestick. The important thing to remember is that shadows or wicks are not counted; focus only on the bodies.

There are several conditions that must be met before you can say this is an engulfing pattern. First, there must already be a trend, either bullish or bearish. Then, the second condition is that there are two candlesticks with a specific formation.

Now, for a bearish engulfing pattern, it occurs after a bullish trend. So, you see the first candlestick is small and green (bullish), then the next candlestick is red (bearish) and its body completely covers the previous green candlestick. That’s a sign of a reversal.

There are some requirements you need to check if you want to confirm this is truly a bearish engulfing. The red candlestick’s body must be longer than the previous green candlestick’s body. Also, the low price of the red candlestick must be lower than the low price of the green candlestick. And ideally, the close price of the red candlestick should be lower than the high price of the green candlestick, but this is not a strict requirement.

On the other hand, there is also a bullish engulfing pattern which is the opposite. It occurs after a bearish trend, where a small red candlestick is covered by a large green candlestick. The conditions are similar but reversed: the green body must be longer, its high must be higher, and ideally, the close should be above the low of the previous red candlestick.

In my opinion, if you already understand how to read that a bearish engulfing is a valuable reversal signal, this can be a good tool for timing entries or exits. But of course, it still needs to be combined with other indicators and solid risk management.