SWAIN SECURITIES

Bearish Reversal Candlesticks Pattern

Bearish Engulfing

Bearish Engulfing is a multiple candlestick pattern that is formed after an uptrend indicating a bearish reversal.

It is formed by two candles, the second candlestick engulfing the first candlestick. The first candle being a bullish candle indicates the continuation of the uptrend.

The second candlestick chart is a long bearish candle that completely engulfs the first candle and shows that the bears are back in the market.
Traders can enter a short position if next day a bearish candle is formed and can place a stop-loss at the high of the second candle.

Shooting Star
Shooting Star is formed at the end of the uptrend and gives a bearish reversal signal.

In this candlestick chart, the real body is located at the end, and there is a long upper shadow. It is the inverse of the Hanging Man Candlestick pattern.
This pattern is formed when the opening and closing prices are near to each other, and the upper shadow should be more than twice the real body.

Tweezer Top
The Tweezer Top pattern is a bearish reversal candlestick pattern that is formed at the end of an uptrend.

It consists of two candlesticks, the first one being bullish and the second one being bearish candlestick. Both the tweezer candlesticks are almost or the same height.

When the Tweezer Top candlestick pattern is formed, the prior trend is an uptrend. A bullish candlestick is formed, which looks like the continuation of the ongoing uptrend.

On the next day, the high of the second day’s bearish candle’s high indicates a resistance level. Bulls seem to raise the price upward, but now they are not willing to buy at higher prices.
The top-most candles with almost the same high indicate the strength of the resistance and also signal that the uptrend may get reversed to form a downtrend. This bearish reversal is confirmed on the next day when the bearish candle is formed.

Spinning Top
The spinning top candlestick pattern is the same as the Doji, indicating indecision in the market.

The only difference between the spinning top and the doji is in their formation, the real body of the spinning is larger as compared to the Doji.

xxxxxxx

Evening Star Pattern
The Evening Star is a multiple candlestick pattern that is formed after the uptrend indicating a bearish reversal.

It is made of 3 candlesticks, the first being a bullish candle, the second a doji, and the third being a bearish candle.

The first candle shows the continuation of the uptrend, the second candle being a doji indicates indecision in the market, and the third bearish candle shows that the bears are back in the market and reversal is going to take place.

The second candle should be completely out of the real bodies of the first and third candles.
Traders can enter a short position if next day a bearish candle is formed and can place a stop-loss at the high of the second candle.

Hanging man
Hanging Man is a single candlestick pattern that is formed at the end of an uptrend and signals a bearish reversal.

The real body of this candle is small and is located at the top with a lower shadow which should be more than twice the real body. This candlestick pattern has no or little upper shadow.

The psychology behind this candle formation is that the prices opened, and the seller pushed down the prices.

Suddenly the buyers came into the market and pushed the prices up but were unsuccessful in doing so, as the prices closed below the opening price.
This resulted in the formation of bearish pattern and signifies that seller are back in the market and uptrend may end.

Traders can enter a short position if next day a bearish candle is formed and can place a stop-loss at the high of Hanging Man.

xxxxx

Dark cloud cover

Dark Cloud Cover is a multiple candlestick pattern formed after the uptrend indicating a bearish reversal.

It is formed by two candles, the first candle being a bullish candle which indicates the continuation of the uptrend.

The second candle is a bearish candle which opens the gap up but closes more than 50% of the real body of the previous candle, which shows that the bears are back in the market and a bearish reversal is going to take place.
Traders can enter a short position if the next day a bearish candle is formed and can place a stop-loss at the high of the second candle.

 

Evening doji star
A 3-candlestick pattern. The pattern is similar to the “evening star”, but is considered to be a stronger signal as the middle candle is doji.

xxxxxxxx

Gravestone doji

Gravestone Doji is one of the various Doji formations available. Unlike the Doji star, which denotes market indecision, the gravestone candlestick signals a price reversal. However, traders must wait for the following candle to form to confirm the shift. It appears during a market uptrend, signaling the possibility of a bearish reversal.

Although the gravestone Doji candlestick is uncommon, you must be cautious when identifying one when you see one. It resembles an inverse dragonfly design or an upside-down ‘T.’ When the open, low, and close prices are all the same, yet buyers were present early in the market to try to push the price higher, this happens. The market’s lengthy upward shadow shows that it was looking for and finding the upper resistance level. The bulls attempted to drive the price higher, but a big selling binge ultimately prevailed, completely rejecting the upward trend.