Bearish Engulfing
The Bearish Engulfing is a candlestick patterns indicator used in Skyrexio Strategy Builder for pattern recognition and reversal/continuation signals.
Introduction
The Bearish Engulfing is a bearish reversal candlestick pattern that signals potential SHORT opportunities or LONG position exits. This two-candle pattern occurs when a large bearish candle completely engulfs the previous smaller bullish candle, indicating strong selling pressure overwhelming buying pressure.
How Bearish Engulfing Works
Bearish Engulfing is a two-candle bearish reversal pattern with specific characteristics:
• Complete engulfment - The bearish candle's body completely contains the previous bullish candle's body • Opening gap up - The bearish candle opens above the previous candle's high • Closing below - The bearish candle closes below the previous candle's low • Volume confirmation - Higher volume on the engulfing candle strengthens the signal • Context matters - Most effective at resistance levels or after uptrends
Key Characteristics
Category
Candlestick Patterns
Type
Bearish Reversal Signal
Primary Use
SHORT entries, LONG exits
Timeframe
All timeframes supported (1m to 1M)
Confirmation
Volume, resistance levels, trend context
Strategy Applications
🔴 SHORT STRATEGY (Primary Use)
Bearish Engulfing is primarily a SHORT signal - enter short positions when the pattern appears.
Base Entry Order (SHORT)
Base Order Condition: Bearish Engulfing Pattern Detected
First Condition: Bearish Engulfing
Timeframe: 1H
Additional Confirmation:
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1HAdditional Entry Orders (SHORT)
Additional Entry 1: Pattern confirmation with momentum
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 60
OR
Additional Entry 2: Breakdown below support
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1HTake Profit Orders (SHORT)
Rule 1: Exit condition - Target reached at support level
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1H
OR
Rule 2: Exit condition - Oversold bounce warning
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 25
OR
Rule 3: Exit condition - Bullish reversal pattern detected
First Condition: Bullish Engulfing
Timeframe: 1HStop Loss Orders (SHORT)
Rule 1: Stop loss - Pattern invalidated (price above engulfing high)
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1H
OR
Rule 2: Stop loss - Volume surge breaks bearish momentum
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H
OR
Rule 3: Stop loss - Bullish momentum confirmed
First Condition: MACD Line
Timeframe: 1H
Operator: Cross Above
Second Condition: MACD Signal Line
Timeframe: 1H🟢 LONG STRATEGY (Secondary Use)
Bearish Engulfing can be used in LONG strategies as an exit signal or contra-trend bounce entry in oversold conditions.
Counter-Trend Risk: Using Bearish Engulfing for LONG entries is high-risk and should only be considered in extreme oversold conditions with very tight risk management.
Base Entry Order (LONG) - Contra-trend bounce
Base Order Condition: Bearish Engulfing in oversold market
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 25
AND
First Condition: Bearish Engulfing
Timeframe: 1HAdditional Entry Orders (LONG) - Not recommended
Additional entries not recommended for LONG strategy using Bearish Engulfing. Use other bullish indicators like:
Bullish divergence indicators
Take Profit Orders (LONG) - Exit existing positions
Rule 1: Exit condition - Bearish Engulfing signals trend reversal
First Condition: Bearish Engulfing
Timeframe: 1H
OR
Rule 2: Exit condition - Resistance level reached
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1H
OR
Rule 3: Exit condition - Overbought momentum exhaustion
First Condition: RSI
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 78Stop Loss Orders (LONG) - Protect existing positions
Rule 1: Stop loss - Bearish Engulfing confirms downtrend
First Condition: Bearish Engulfing
Timeframe: 1H
OR
Rule 2: Stop loss - Support breakdown confirmed
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1H
OR
Rule 3: Stop loss - Volume confirms breakdown
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1HAdvanced Strategy Combinations
Multi-Timeframe Bearish Engulfing (SHORT)
Resistance Level Rejection (SHORT)
Risk Management Guidelines
Position Sizing
SHORT Strategy
Standard
Pattern appears at resistance
LONG Strategy
Reduced (25-50%)
Counter-trend plays only
High Volume
Increase confidence
Can use larger size
Low Volume
Reduce size
Wait for confirmation
Pattern Reliability Factors
✅ Appears at established resistance levels ✅ High volume on engulfing candle ✅ Follows extended uptrend ✅ Confirmed by momentum indicators
Best Practices
For SHORT Strategies
Wait for resistance - Best results when pattern forms at key levels
Volume confirmation - Ensure high volume on engulfing candle
Trend context - Most effective after uptrends or at resistance
Quick execution - Enter on pattern completion, don't wait
For LONG Strategies
Extreme oversold only - Only consider in deeply oversold conditions
Counter-trend risk - Use smaller position sizes
Quick profits - Take profits fast on any bounce
Tight stops - Use very tight stop losses
Common Mistakes to Avoid
Wrong direction - Don't go LONG on Bearish Engulfing without extreme oversold conditions
No context - Ignoring support/resistance levels and trend direction
Volume ignored - Trading pattern without volume confirmation
Late entry - Entering after pattern has already played out
Market Conditions Analysis
Uptrend
🟢 High (reversal signal)
🔴 Very Low (against trend)
Downtrend
🟡 Medium (continuation)
🔴 Low (counter-trend)
Ranging
🟢 High (at resistance)
🟡 Medium (at support only)
High Volatility
🟢 High (clear signals)
🔴 Low (whipsaws)
Low Volume
🔴 Low (wait for confirmation)
🔴 Very Low (avoid)
Related Patterns
Conclusion
Key Takeaways
PRIMARY USE: SHORT entries at resistance levels
SECONDARY USE: LONG exits when holding positions
TERTIARY USE: Counter-trend LONG entries (high risk, oversold only)
ALWAYS: Confirm with Volume and respect market context
Success with Bearish Engulfing requires understanding its bearish nature and using it appropriately within the context of your overall trading strategy. Never fight the pattern's natural direction without compelling oversold conditions and proper risk management.
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