Candlesticks patterns are widely used in technical analysis to determine the possible price movements based on past patterns. It is a useful tool in trading that shows the four price points (open, close, high, and low) throughout the specified time. Some opportunities are based on the same price movement shown through the candlesticks patterns.
Trading is usually dominated by emotions which can be predicted through the candlestick charts. The candlestick patterns helps the traders to understand the emotions surrounding a stock, or other assets, this helps in making better predictions about where that stock might head to.
The top bearish candlestick patterns helps in predicting the negative movement of the prices where the sellers are exerting pressure over buyers and selling pressure is overpowering the buying pressure. With the bearish candlestick pattern, one can easily predict the downturn and take the position accordingly.
There are no particular measures by which you can calculate the guaranteed result from the approach you have chosen to invest in the stock market. You always need to check and predict the result through the historical data and prices.
This article has covered the top 5 bearish candlestick patterns and everything that you need to know about them.
List of 5 Top Bearish Candlestick Patterns
Below is the list of top 5 bearish candlestick patterns that helps in predicting the downturns in prices. The best 5 bearish candlestick patterns:
1. Bearish Engulfing Pattern
A bearish Engulfing pattern or the bearish reversal pattern is one of the easy and useful to spot in a bullish market. This one is a trend reversal pattern that occurs when the prices are in the uptrend but still, the buyers lose the momentum. This is a trend reversal pattern, even if the prices are in an uptrend, buyers are losing momentum.
This is usually shown through the small green candles with short shadows. This is followed by a large bearish or red candle that opens above the close of the previous candle.
Later it can go below the previous candle forming the pattern as the bearish (red) candle takes over the preceding bullish (Green) candle.
How to Spot It?
To spot it, when the prices are increasing even if the trade cycle is short term Bullish (Green) candlestick must be completely overshadowed by the bearish (Red) candlestick. The bullish candle shows the sign of momentum loss. The dominance of selling is reflected by the large bearish candlestick. This way the bearish reversal can be confirmed with the selling volume of the overtaking day.
2. Dark Cloud Cover
The dark cloud covers the bearish counter of the pricing pattern. This pattern can help in spotting the bullish trends whenever a buyer is in the control denoted by a long bullish (Green) candle followed by a gap higher opening then turning into a Bearish (Red) candle. This closed at least halfway into the prior and closes at least halfway into the prior Bullish (Green) candlestick’s body.
How to Spot It?
Spotting it is easier for example when the major trend is uptrend for most of the period, the first candle will be bullish (green) and the second is bearish (red). This occurs at the end of the trend which indicates the reversal Bearish (red) candle opens higher than the prior day’s close and closes below or at least half of the bullish (green) candle. Also, the Bearish (red) candle in the pattern shows the selling pressure is larger the candle more intensity of bearish reversal. In short, both the trading sessions have large volumes
3. Bearish Harami
Bearish Harami candlestick pattern is spotted in the uptrend. When there is a long period of an uptrend or sudden changes in the market a bullish (green) candle is followed by a bearish (red) candle that opens lower than the previous day’s close. This reflects that there is an increase in the sellers in the market who push down the price but only to the level where buyers keep it above the previous open. The opening and closing of the bearish market take place during the opening and close of the previous day.
How to spot it?
When the uptrend goes on for a good amount of period the first candle is bullish and the other one is bearish. The bearish candle opens lower to the bullish candles close. It then closes the open of the bullish (green) candle’s close of the previous day. The Weakening of buying pressure and increase in selling gives out the confirmation signal.
Moreover, the intensity of the reversal can be measured by the longer the bearish (red) candle will cover the bullish (green) candle greater will be the reversal.
4. Evening star
The evening star commonly occurs in bearish formation. This implies that the end of the bullish trend reverses into a bearish trend. This usually occurs at the top of the uptrend. The formation takes place starting with a bullish (green) candle, a second small body (green/red) candle that opens and closes higher above the first candle. This replicates the structure of a star and the third bearish (red) candle closes fairly into the first bullish (green) candle. Moreover, the price forms a bullish (green) candle which is followed by the price opening up higher than the previous session. The buyers are unable to continue to upward push and face resistance from sellers. On the other hand the second (green/red) candle so the prices end up being above the previous close.
How to spot it?
To spot it the prices must be in an uptrend. To spot the first bullish (green) candle and the second small candle shows indecision in buyers and sellers. The third bearish (red) candle closes below the close of the bullish (green) candle this will confirm the bearish reversal. Stronger the reversal if the third bearish candle is larger.
5. Gravestone Doji
The Gravestone Doji is the only single stick candle pattern on the list. This is one of the most certain and easiest signal patterns which usually occur at the top of the uptrend.
It works as if bulls/buyers are pushing prices higher than at a point where the buyers show a sign of exhaustion. This occurs when the bullish (green) candle opens higher than the previous candle. This results in buyers not being able to hold the prices for a long time. The reason behind this is the selling pressure pushes the price to the opening of the candle forming a long upper shadow with little to no one of the candle.
How to spot it?
For spotting the pattern the price must be in the uptrend for a while. The candle should have an upper long shadow. The higher the selling volume on the day of gravestone doji shows the sellers taking over.
A bearish candlestick pattern is usually formed after the uptrend signal a point of resistance in the share market. Due to the high volatility of the market price, traders often close long positions and open short positions to take advantage of the falling price. These are the top 5 bearish candlestick patterns. The candlesticks are useful in predicting change in trend but one thing we must understand bearish patterns are just the probability of the bearish trend. You should always wait to analyze and confirm before taking any of the investment steps. The principle thus remains the same for every analysis.
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