So, here’s the deal: a bearish engulfing is a candlestick pattern that often appears on charts when the trend is changing direction. The main idea is that there are two consecutive candlesticks where the second one completely engulfs or covers the body of the previous candlestick. The important thing to remember is that we only look at the candlestick bodies; shadows or wicks don’t need to be considered.

For this pattern to appear, several conditions must be met first. First, there must be an established trend, whether bullish or bearish. Then, secondly, there must be a formation of two candlesticks with specific characteristics.

If a bearish engulfing occurs during a bullish trend, it means that previously there was a small green candlestick, followed by a much larger red candlestick that completely covers the green one. Conversely, a bullish engulfing happens when we are in a bearish trend, with a small red candlestick followed by a large green candlestick that engulfs everything.

For more details, for a bullish engulfing, there are several criteria to check. The length of the green candlestick must be greater than the previous red candlestick, and the high of the green candlestick must also be higher than the high of the red candlestick. An extra point if the close of the green candlestick also surpasses the high of the previous red candlestick, but this is optional.

Meanwhile, bearish engulfing has the opposite criteria. The red candlestick must be longer than the previous green one, its low must be lower, and ideally, its close should dip below the low of the green candlestick. This pattern is often seen as a fairly reliable reversal signal, especially if all conditions are clearly met on the chart.