Bearish Engulfing Pattern

BEARISH ENGULFING PATTERN (BEP)
a large black body which engulfs a small white body in an uptrend

Characteristics:
1. Market is on an uptrend;
2. Day 1 has a white stick;
3. Day 2 has a black stick that completely engulfs Day 1’s white body.

Brief Explanation:
The BEP is a large black body which engulfs a small white body in an uptrend. It is an important top reversal signal. The market here is in a bull mood. Then there is decreased buying as seen by the short white body. This is followed by a strong sell-off which leads to a close below the previous day’s open. It can be seen that the uptrend has lost momentum and the bears may be gaining strength.

Notes:
1. A bearish reversal is more likely if there is heavy volume on the second body
2. A confirmation on Day 3 is necessary to ensure that the uptrend has reversed (through a black stick, a large gap down or a lower close).