Bearish Candlestick Pattern
Here are some of the useful bearish candlestick pattern. You would probably realise that the bearish patterns are the opposite of the ones you read in the Bullish Patterns article.
A shooting star is the opposite of a hammer. The stock opens near the low. The bulls then push the price up. However, the stock cannot hold on to its gain and closes at its low.
You will often see the shooting star at the top of an uptrend. It is usually at the top that everyone is excited about the stock. So, they keep buying and buying thinking it will go up. At this time, you might notice that the PE of the stock has become unreasonably high.
Everyone who wants to buy the stock has probably committed all their money into the stock. So, who is left to buy? This is when you will usually see the shooting star appear.
When you see a shooting star, it signifies that the uptrend may slow down. A possible reversal may occur.
A doji shows that market participants are undecided. The stock opened and closed at or near the same price. Throughout the day, bulls try to push the price up. The bears also tried to push the price down. Nobody won on that day.
When you see a doji, it tells you that the current trend may be weakening. The doji is often seen before a reversal in a stock. So, take note of it.
This is the opposite of the bullish engulfing.
A bearish engulfing pattern consists of two candlestick bars. The second bar completely engulfes the previous bar. The first bar is an up bar. The next day, the stock opens higher. Everybody thinks that the stock is going to go up further.
However, the stock drops and close way below the low of the previous day. The bears have taken control and eliminated the bulls. Thus, the stock may be ready to go down.
I have put another copy of the bearish candlestick pattern here so you do not need to scroll up and down to look at them
This is the opposite of a bullish harami.
The bearish harami is formed when the previous day's candle completely engulfes the subsequent day's candle.
On the previous day, you see a promising wide range up bar. Everybody is happy and thinks that the stock may go up again tommorow.
On the next day, the stock opened below the previous day's close. We call that a gap down. Instead of going up, the stock went down. So, everybody is surprised. They start to think 'well, things may not look that good after all'.
When you see that happening, it signals that the bears may be starting to take control. There is a possibility that the stock might move down from there.
Dark Cloud Cover
This is the oppostire of the bullish piercing.
A dark cloud cover consists of two candle bars. The first bar is an up bar. The stock closed near the top of the day. The next day, the stock opens above the previous day's closing price. We call this a gap up.
Things look very good. However, the stock starts to drop and closes near the middle of the previous day's bar. Things may not look that good after all.
A dark cloud cover shows a potential reversal. This pattern can occur at the end of an uptrend.
By now you would have realised that the bearish candlestick pattern in this page is exactly opposite the ones in the Bullish Patterns. All you need to do is just reverse the thinking process.
Just like the bullish patterns, the bearish candlestick pattern tells you the emotions and mindset of market participants. It also shows you whether there is fear or panic. When you know what others are thinking, you are better positioned to take advantage of any situation.
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