Bearish engulfing

pattern trading
strategy guide
 Bearish engulfing pattern trading strategy guide
Do you know why most traders lose money when trading the Bearish Engulfing pattern?

It’s because they treat them all the same!

Here’s the thing:

You can have two identical Bearish Engulfing patterns but, one is a high probability setup and
the other is to be avoided (like how you run away from a stinky ol skunk).

Why?

Because you must pay attention to the context of the market.

I know that’s not useful (like telling a blind man to watch his step).

That’s why I’ve written this trading strategy guide to teach you all about the Bearish Engulfing
pattern — so you can trade it like a professional trader.

You’ll discover:

• What is a Bearish Engulfing pattern and how does it work

• The ONE mistake you must avoid when trading this pattern…
• How to use the Bearish Engulfing pattern and profit from “trapped” traders
• How to “predict” market turning points with the Bearish Engulfing pattern
• The Moving Average and Bearish Engulfing combo
• 3 trading hacks that increase your winning rate

You ready?

Then let’s get started…

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 Bearish engulfing pattern trading strategy guide

What is a Bearish Engulfing pattern and how

does it work?

A Bearish Engulfing Pattern is a (2-candle) bearish reversal candlestick pattern that forms after
an advanced in price.

Here’s how to recognize it:

• The first candle has a bullish close

• The body of the second candle completely “covers” the body first candle (without taking
into consideration the shadow)
• The second candle closes bearish

And this is what a Bearish Engulfing Pattern means…

1. On the first candle, the buyers are in control as they closed higher for the period
2. On the second candle, strong selling pressure stepped in and closed below the previous
candle’s low — which tells you the sellers have won the battle for now

In essence, a Bearish Engulfing Pattern tells you the sellers have overwhelmed the buyers and
are now in control.

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 Bearish engulfing pattern trading strategy guide

Don’t make this BIG mistake when trading the

Bearish Engulfing pattern…
Here’s the thing:

Many traders would spot a Bearish Engulfing pattern and look to short the market.

Why?

Because you think a Bearish Engulfing pattern is a sign of weakness that the market is about to
reverse lower.

Wrong!

I’ll explain.

Yes, a Bearish Engulfing pattern shows the sellers are in control — but it doesn’t mean the price
is about to reverse lower.

Why?

Because in an uptrend, the price is likely to continue higher and not reverse because there’s a
Bearish Reversal pattern.

Think about this…

A trend can last for weeks, months or even years.

Do you think the entire move will reverse just because of one reversal candlestick pattern?

Unlikely.

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 Bearish engulfing pattern trading strategy guide
In fact:

If you look at the lower timeframe, a Bearish Reversal pattern is usually a retracement within
the trend

Here’s what I mean…

So, what’s the lesson here?

A Bearish Engulfing pattern doesn’t mean jack shit.

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 Bearish engulfing pattern trading strategy guide
If you want to know where the market is likely to go, pay attention to the trend and not the
candlestick pattern.

Now you’re probably wondering:

“So what’s the use of the Bearish Engulfing pattern?”

Well, that’s what I’ll cover next.

Read on…

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 Bearish engulfing pattern trading strategy guide

How to use the Bearish Engulfing pattern and

profit from “trapped” traders
On its own, a Bearish Engulfing pattern is meaningless.

However, if you combine it with market structure (like Support & Resistance) — that’s where it
really shines.

Here’s what to look for…

1. A strong rally towards market structure (like Resistance or swing high)

2. A Bearish Engulfing pattern that reverses at the highs

Here’s the idea behind it…

When the market rallies strongly towards a key level, many traders will think…

“The market is so bullish. Let me buy now and capture some easy gains!”

The next thing you know, the price does a 180-degree reversal at the highs and now this group of
traders is “trapped”.

And if the price continues lower, it’ll trigger their stop-loss fueling further selling pressure (which a short
trader can profit from).

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 Bearish engulfing pattern trading strategy guide
Here’s an example:

Next…

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 Bearish engulfing pattern trading strategy guide

How to “predict” market turning points with

the Bearish Engulfing pattern
Here’s how…

A downtrend consists of a trending move lower, followed by a retracement, and then another move
lower.

So, you want to pay attention to the retracement move towards previous Support turned Resistance.

Why? Because that’s where selling pressure lurks that could push the market lower.

However, you can’t “confirm” if the price will reverse from that area because it could also break above
it.

So that’s when you use the Bearish Engulfing pattern to “confirm” the sellers are in control — and the
market is likely to move lower.

Here’s an example…

Pro Tip: This technique works best in a weak trend. For a strong or healthy trend, you should go with the
next trading technique…

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 Bearish engulfing pattern trading strategy guide

The Moving Average and Bearish Engulfing

combo
In a healthy downtrend, the market tends to stay below the 50-period Moving Average (MA).

So any pullback towards the 50 MA presents a trading opportunity to go short.

Here’s what to look for…

1. Identify a healthy trend with the price respecting the 50MA

2. Wait for a pullback towards the 50 MA
3. Watch for a Bearish Engulfing pattern to reject the 50MA

Here’s an example:

Pro Tip:

This technique can also be applied to a strong trending market (where the price respects the 20MA).

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 Bearish engulfing pattern trading strategy guide

Bearish Engulfing Pattern: 3 trading hacks

that increase your winning rate
Now…

If you want to take your trading to the highest level, you must understand the nuances of the market.

So, here are 3 questions to ask yourself whenever you’re about to trade a Bearish Engulfing pattern…

1. How did the price approach a level?

2. Is the price rejection strong or weak?
3. What’s the market structure on the lower timeframe?

I’ll explain…

1. How did the price approach a level?

Warning: This is an advanced trading concept so please pay attention.

When you’re trading a reversal, you want to see a strong momentum move into a level.

Here’s why…

When you get a strong momentum move lower, it’s because there isn’t enough buying pressure to hold
up the prices — that’s why the price has to decline lower to attract buyers.

Now the entire “down move” is called a liquidity gap (a lack of interest) since not many transactions
took place on the decline.

This means the market can easily reverse in the opposite direction due to a lack of interest around the
price level.

That’s why you often see a strong move down into Support, and then BOOM, the price does a 180-
degree reversal.

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 Bearish engulfing pattern trading strategy guide
Here’s an example…

So remember, if you want to trade price reversals, always look for a strong momentum move into a
level.

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 Bearish engulfing pattern trading strategy guide
2. Is the price rejection strong or weak?

Here’s the thing:

When you’re trading the Bearish Engulfing pattern, you don’t want to see a weak price rejection at a key
level.

Because it doesn’t convince you the sellers are in control.

This is what I mean…

Instead, you want a strong price rejection.

It’s so strong that the range of the Bearish Engulfing pattern exceeds the preceding candles.

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 Bearish engulfing pattern trading strategy guide
An example:

See the difference?

When you get a strong price rejection at a key level, the market is likely to reverse lower.

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 Bearish engulfing pattern trading strategy guide
3. What’s the market structure on the lower timeframe?

Now, the reason why you want to watch the lower timeframe is that it shows you who’s in control.

For example: A strong move into Resistance on the Daily timeframe is a series of higher highs and lows
on the 4-hour timeframe.

Now imagine that the price is at Resistance (on the daily timeframe) and you get a lower high and low
(on the 4-hour timeframe).

An example…

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 Bearish engulfing pattern trading strategy guide
What does it mean?

Well, it tells you the sellers are in control and the market is likely to reverse lower.

With this insight, you have a low-risk opportunity to short the market and ride the next wave down.

This is powerful stuff, right?

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 Bearish engulfing pattern trading strategy guide

Conclusion
So here’s what you’ve learned:

• The Bearish Engulfing is a reversal pattern that tells you the sellers are in control
• Don’t trade the Bearish Engulfing pattern in isolation — you must take into consideration the
trend, market structure, etc.
• You can combine the Bearish Engulfing pattern with the market structure to identify high
probability trading setups
• The 3 hacks I shared with you will improve your winning rate (a strong move into a level, a strong
price rejection, and a break of structure)

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