The Top 5 Bearish Candlestick Patterns

In our previous lesson, we covered the top 5 bullish candlestick patterns. This time, we will focus on the top 5 bearish candlestick patterns. The appearance of these patterns are usually good indicators of an upcoming price decline. Following are the 5 bearish candlestick patterns you must definitely know.

  • Bearish Engulfing
  • Hanging Man
  • Bearish Harami
  • Shooting Star
  • Dark Cloud Cover

#1 Bearish Engulfing

A bearish engulfing candlestick pattern comprises of two candles and appears during an uptrend.

The first candle would be a small green candle while the second candle would be a big red candle. The second day’s candle would completely engulf the body of the first day’s candle.

The figure shows the Bearish Engulfing pattern.

A practical application of this pattern can be seen on the chart of the stock below. Once the Bearish engulfing pattern was formed after an uptrend, the stock started moving down.

#2 Hanging Man

Hanging Man is a single candle pattern indicating a reversal from a bullish bias to a bearish bias. A hanging man has a long lower shadow and a small body and appears at the top of a trend or during an uptrend.

The figure shows the Hanging Man pattern.

A practical application of this pattern can be seen on the chart of the stock below. Once the hanging man pattern was formed during an uptrend, the stock reversed its trend and started moving down.

#3 Bearish Harami

Bearish Harami is a bearish reversal pattern that comprises of two candles.  The first candle would be a green candle while the second candle would be a red candle with a small body. The second candle of bearish harami pattern would be completely within the range of the body of the first candle.

Note: If the second candle is a Doji, it is called as Bearish Harami Cross pattern.

Interestingly, the term ‘Harami’ is the Japanese word for pregnant. In this pattern, the green candlestick is considered as the ‘mother’ and the small candlestick, the ‘baby’.

The figure shows the Bearish Harami pattern.

A practical application of this pattern can be seen on the chart of the stock below. Once the Bearish Harami pattern was formed in an uptrend, the stock started moving downwards.

#4 Shooting Star

Shooting star is a bearish pattern that is made of two candles.  This pattern appears during an uptrend and signals an upcoming reversal to bearish bias. The first candle would be a green candle. The second candle would be a green or red candle which has a long upper wick and small body (this second candle basically looks like an inverted hammer). The top of the body of the second candle would be higher than the body of the first candle.

The figure shows the Shooting Star pattern.

A practical application of this pattern can be seen on the chart of the stock below. Once the Shooting Star pattern was formed during an uptrend, the stock started moving down.

#5 Dark Cloud Cover

Dark Cloud cover pattern consists of two candles and is a top reversal pattern. This pattern usually appears during an uptrend or top of trend and signals an upcoming price decline. The first candle would be a green candle. The second one would be a red candle. The second candle would open at a new high with a gap up and then close more than halfway into the body of first day’s candle.

The figure shows the Dark Cloud Cover.

A practical application of this pattern can be seen on the chart of the stock below. Once the Dark Cloud Cover pattern was formed after an uptrend, the stock started moving downwards.

Happy Trading!

Tara