BEARISH ENGULFING PATTERN
The bearish engulfing pattern is a strong bearish reversal candlestick pattern for intraday in an uptrend market near the resistance zone or supply zone. We can follow a bearish engulfing pattern like a shooting star candle.
Since bearish engulfing is a two-candle pattern, the first candle should have a green body candle and the second candle should have a red body candle. The second candle with a red body candle should completely engulf (cover) the first candle with a green body candle.
You can see this in the below image
How to work Bearish engulfing?
It is very important to look for a bearish engulfing pattern at specific zones. In our strategy, our specific zone is a resistance zone. A resistance zone is a zone where the price makes a high and correction back downward from that high. You may also call it a correction wherein the price is in an uptrend; it pauses at a certain zone or it halts at a certain zone and moves downwards. The zone from which it made a high and correction back is called the resistance zone or the supply zone.
In the above chart, the Market was in an uptrend & reached near resistance zone and in resistance zone, red candle formed after the green candle, formed a strong red candle, and engulfed the previous green candle. After a bearish engulfing pattern, you have to enter for a short position. You can see in the above chart
What should be the stop loss & target in the Bearish Engulfing pattern?
After the Bearish engulfing pattern, you have to enter for a short position.
A bearish engulfing pattern high should be your stoploss which is a very small stoploss with a high target of at least 1-2% of the Stock price or you can go to the support zone level.
How to trade with Shooting Star candle?
What should be the entry point for trade?
Wait for the second candle to close with a strong red candle.
Enter the trade at the opening of the next third candle or below the engulf pattern.
What should be stoploss for trade?
You have to place stop-loss orders above the bearish engulfing pattern's high point.
Consider the overall market sentiment bullish or bearish market.
Don't risk more than 1-2% of your total trading capital.
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