Here are ten bearish candlestick patterns that can help you identify potential market reversals and avoid losses:
1. Bearish Engulfing
Description: A larger bearish candle completely engulfs the previous smaller bullish candle, signaling a strong shift to the downside.
Implication: Indicates that sellers have overpowered buyers, suggesting a bearish reversal.
2. Evening Star
Description: A three-candle pattern that starts with a large bullish candle, followed by a small indecisive candle (star), and ends with a bearish candle closing deep into the first candleâs body.
Implication: Signifies a top reversal, with momentum shifting from buyers to sellers.
3. Three Black Crows
Description: Consists of three consecutive long bearish candles, each closing lower than the previous one, usually with small or no wicks.
Implication: A strong signal of continued bearish momentum, indicating a potential downtrend.
4. Dark Cloud Cover
Description: A bearish candle opens above the previous bullish candleâs close but then closes below the midpoint of the previous candle.
Implication: Indicates a bearish reversal with strong selling pressure.
5. Shooting Star
Description: A single candle with a small body near the dayâs low and a long upper wick, showing that prices were pushed up but couldnât be sustained.
Implication: Signals a potential reversal after an uptrend, showing that buyers are losing control.
6. Bearish Harami
Description: A small bearish candle is completely engulfed by the prior larger bullish candle.
Implication: Suggests indecision and a potential reversal, often followed by further bearish movement.
7. Hanging Man
Description: A bearish reversal pattern with a small body at the top of the range and a long lower wick, showing strong selling pressure.
Implication: Found at the top of an uptrend, it indicates a possible reversal.
8. Gravestone Doji
Description: A candle with no body and a long upper wick, closing at the low of the session, indicating a rejection of higher prices.
Implication: Strong bearish reversal signal, especially at the end of an uptrend.
9. Falling Three Methods
Description: A bearish candle is followed by three smaller bullish candles that stay within the range of the first candle, ending with another strong bearish candle.
Implication: A continuation pattern that confirms the prevailing downtrend.
10. Bearish Abandoned Baby
Description: A rare three-candle pattern where a doji appears after a gap up, followed by a bearish gap down.
Implication: Signifies a strong bearish reversal, as buyers are unable to maintain momentum.
Understanding these patterns can help you make informed trading decisions, allowing you to spot potential bearish reversals and protect your capital.
