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Bearish Engulfing and Piercing pattern - I

Bearish engulfing 

How to recognize it? 


  • There must be a proceeding uptrend 
  • A shorter green candle followed by a long red candle 
  • The longer red candle opens higher and closes lower than the shorter green candle, completely engulfing it. 


What is the psychology behind? 


  • The green candle implies the control of the bulls following a prolonged uptrend 
  • In next session, the market opens about the high of the green candle, suggesting continuation of the bullish force 
  • The bulls then lose momentum, the bears take charge then send the price down during the session and eventually manage to close below the low of the green candle 
  • The bears have now fully overridden the Bulls 


How do we trade it? 


  • Look for the bearish engulfing at the top of an uptrend 
  • Wait for the next candle to close below the law of the red candle to confirm the existence of bearish force 
  • Open the short position upon confirmation 
  • Place a stop loss below the high of the red candle



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