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Bearish engulfing and dark cloud cover patterns are both bearish candlestick reversal patterns. They form after an advance and require confirmation with further downside. The “real” body of a candlestick is key to understanding these patterns. Real bodies represent the open and the close. A candlestick has a hollow body when the close is above the open. This means prices moved higher after the open. A candlestick has a filled body when the close is below the open, which means prices moved lower after the open.
A bearish engulfing pattern consists of two candlesticks. The first candlestick is hollow, indicating the close was above the open. This strong close means the uptrend remains in place. The second candlestick opens above the close of the first candlestick, but closes below the open of the first candlestick. As a result, the second candlestick is filled and completely engulfs the first candlestick.
A dark cloud cover pattern also consists of two candlesticks. The first is a long hollow candlestick, indicating the close is above the open. This strong affirms the current uptrend. The second candlestick opens above the HIGH of the first candlestick, but closes below the mid-point of the first candlestick’s real body. The inability to hold gains after a strong open shows weakness.
Keep in mind that candlesticks are short-term and only valid for 1-2 weeks. The pre-defined scans page at Stockcharts.com identifies stocks with bearish engulfing and dark cloud cover patterns every trading day ( click here). You can also read more on candlesticks in the Chartschool ( click here).
A bearish engulfing pattern consists of two candlesticks. The first candlestick is hollow, indicating the close was above the open. This strong close means the uptrend remains in place. The second candlestick opens above the close of the first candlestick, but closes below the open of the first candlestick. As a result, the second candlestick is filled and completely engulfs the first candlestick.
A dark cloud cover pattern also consists of two candlesticks. The first is a long hollow candlestick, indicating the close is above the open. This strong affirms the current uptrend. The second candlestick opens above the HIGH of the first candlestick, but closes below the mid-point of the first candlestick’s real body. The inability to hold gains after a strong open shows weakness.
Keep in mind that candlesticks are short-term and only valid for 1-2 weeks. The pre-defined scans page at Stockcharts.com identifies stocks with bearish engulfing and dark cloud cover patterns every trading day ( click here). You can also read more on candlesticks in the Chartschool ( click here).
