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The Japanese Candlestick Bearish Engulfing Pattern occurs at the top of a long advance in prices. As its name implies, it has bearish connotations. It will display a tall black candle whose “Real Body” fully wraps around, or subsumes, or engulfs the Real Bodies of one or more price bars which precede it. The more previous Real Bodies that are engulfed, the more powerful the pattern. In this example of the Bearish Engulfing In NetApp shares, the Real Body of the tall black candle totally subsumed the Real Bodies of the ten price bars which preceded it.
We need to sit up and take notice when the Real Body of the tall black candle engulfs as many as ten previous Real Bodies. Such a “mass engulfing” typically signifies a strong pattern that is likely to result in a serious price drop.
That is what occurred in this case: The price of NetApp shares fell from a High of $61.02 during the week of February 11, 2011 to a Low of $33.00 during the week of October 7, 2011.
A Japanese Candlestick Bearish Engulfing Pattern as well-developed as this one may not be seen all that frequently; but when it does appear, the likely result is a meaningful falloff in prices.
William Kurtz
http://www.CandlesticksOnSteroids.com
The “Real Body” of a Japanese Candlestick price bar is that “fattened-out” part of a typical Open-High-Low-Close price bar which represents the price range between the Open and the Close. If the Close is higher than the Open, then the Real Body is not filled-in; rather, it is left “white.” If the Close is lower than the Open, then the Real Body is filled in, or made “black.” Obviously, a white Real Body demonstrates that prices rose between the Open and the Close; whereas a black Real Body demonstrates that prices declined between the Open and the Close.
Most often, when we see a Japanese Candlesticks Bearish Engulfing Trend Reversal Warning Pattern the “Real Bodies” of the price bars which are engulfed by the Real Body of the tall black candle are all bunched together at the top of a long price advance. In this example, however, we see that the black candle was so very tall that its Real Body engulfed the Real Bodies of eleven previous price bars which still were in the process of driving toward the peak.
The Bearish Engulfing Trend Reversal Warning Pattern is aptly named: it forecasts a price decline.
In this example in the price record of F5 Networks, we see that the pattern lived up to its billing. From a price High of $145.76 during the week of January 14, 2011, prices fell to a Low of $69.01 during the week of August 26, 2011.
At the completion of the downtrend which had been foretold by the Bearish Engulfing Pattern, prices nearly formed its counterpart, the Japanese Candlesticks Bullish Engulfing Trend Reversal Warning Pattern. It is seen at the bottom-right of the accompanying chart. The Real Body of the tall white candle very nearly engulfed the Real Bodies of the eight preceding price bars. It was a little short on the bottom end of the Real Body to properly be identified as the “real thing;” but, as we can see, it was close enough to the real thing to result in a meaningful rally. As I say in my book “Candlesticks For Brighties,” we do not always find perfection; and frequently, “close is good enough.”
William Kurtz
http://www.CandlesticksOnSteroids.com
The example which is shown on the accompanying Weekly chart of Urban Outfitters is the largest Japanese Candlestick Bearish Engulfing Trend Reversal Warning Pattern that I have ever seen. The “Real Body” of the tall black candle completely engulfs the “Real Bodies” of the seventeen previous price bars.
What does “Real Body” mean? It is the price distance between the Opening price and the Closing price, which is visually shown by “fattening-out” that distance on the price bar. If the Close is higher than the Open, the Real Body is left blank, or “white.” If the Close is lower than the Open, the Real Body is filled-in, i.e., colored “black.” Therefore, the Real Body of an “Up” day would be white; and the Real Body of a Down day would be black.
The bearish intimations of this particular Japanese Candlestick Bearish Engulfing Reversal Warning Pattern were amply borne out: From a High of $39.26 during the week of March 11, 2011, the price of Urban Outfitters shares fell to a Low of $21.47 during the week of October 7, 2011.
William Kurtz
http://www.CandlesticksOnSteroids.com
The Bearish Engulfing Pattern is one of the most powerful and reliable of all Japanese Candlestick Reversal Warning Patterns. It is found at the top of a long price advance, and is characterized by a tall black candle whose “Real Body” (i.e., the price distance between the Opening price and the Closing price, shown as a “fattened-out” part of the total price bar) “engulfs,” or entirely subsumes, the “Real Body or Bodies” of one or more price bars which precede it. (The fact that the tall candle is black signifies that the Opening price was at the top of the Real Body, while the Closing price was at the bottom of the Real Body).
In this example, we see that the Real Body of the tall black candle engulfed the Real Bodies of the seven price bars which preceded it. We do not often see a Bearish Engulfing Pattern which engulfs as many previous Real Bodies as this one.
We can readily see that the bearish promise of this particular Candlestick Bearish Engulfing Reversal Warning Pattern bore fruit: the price of Applied Materials stock fell from a High of $16.93 during the week of March 4, 2011 to a Low of $9.70 during the week of October 7, 2011.
William Kurtz
http://www.CandlesticksOnSteroids.com
The Candlestick “Shooting Star” trend reversal warning pattern arises at the top of a long uptrend. It is so-called because it looks very much like its namesake: it is high in the sky (above all recent prices), it has a tiny “head” (the “Real Body”), and a long tail. It is a bearish pattern, foretelling the probability of a price decline.
This example is just about as good as one could hope to find. The price bar itself is well-formed; it is high in the sky; it arose after a long uptrend in prices; and “the proof is in the pudding:” prices have declined from a High of $70.71 on January 3, 2012 to a Low of $66.57 on January 13.
The Candlestick “Shooting Star” is one of my favorites, because it is easy to spot when it appears, and over time it has proven to be a very reliable reversal warning pattern.
William Kurtz
http://www.CandlesticksOnSteroids.com
In Japanese Candlestick terminology, the “Real Body” of an individual price bar is the “fattened-out” part thereof. If the Real Body is left “white,” the Open was at the bottom of the Real Body while the Close was at the top of the Real Body. The reverse is the case if the Real Body is filled in, or made “black.”
The Bearish Engulfing Pattern is one of the most powerful trend reversal warning patterns of all. It is found at the top of a long uptrend. Its distinguishing characteristic is a tall black Real Body (which signifies a strong Down day) which completely engulfs the Real Bodies of one or more of the immediately preceding price bars.
In this example of the price action in Cognizant Technologies stock, we see that the Real Body of the tall black candle completely engulfed the Real Bodies of the five preceding price bars.
In this case, the Japanese Candlestick Bearish Engulfing Reversal Warning Pattern accurately foretold a decline in the price of Cognizant stock: from a High of $83.48 during the week of May 6, 2011 the price fell to a Low of $53.54 during the week of August 19, 2011.
William Kurtz
http://www.CandlesticksOnSteroids.com
The Bullish Engulfing Pattern is one of the most reliable Candlestick Reversal Warning Patterns. It appears at the bottom of a long downtrend, and is characterized by the “Real Body” (that is, the price distance between the Open and the Close) of a tall white Candle (signifying an “Up” day) completely subsuming, or engulfing, the “Real Bodies” of a Candle or of more than one Candle which preceded it. The pattern is bullish, as its name implies.
The accompanying chart displays a Bullish Engulfing Pattern which arose in Intel stock in March 2009. (This coincided with the Low early in that month which marked the beginning of the Great Rally which persisted into 2011). The pattern is outlined in red at the bottom of the chart. The “Real Body” of the tall white Candle completely engulfed the “Real Bodies” of the three Candlestick price bars which preceded it.
Note that prices rose from a Low of $12.05 in February 2009 to a High of $25.78 in December 2011. The bullish implications of the pattern obviously bore fruit.
The Bullish Engulfing Pattern is just one of a short series of Candlestick Reversal Warning Patterns which are usually successful in anticipating significant reversals of trend. They are equally effective in all time frames in all financial markets – Indexes, individual stocks, bonds, commodities, and Forex.
William Kurtz
http://www.CandlesticksOnSteroids.com
The accompanying chart of Verizon favors us with two Candlestick Reversal Warning Patterns. The first one, an “Inverted Hammer,” occurred on November 25, 2011. The “Inverted Hammer” is characterized by a small “Real Body” (which is the price distance between the Open and the Close) at or very near the bottom of the total price action of the particular time period, and a tall “Shadow” above the “Real Body.” The “Inverted Hammer” will appear at the bottom of an extended downtrend, and is typically preceded by a black Candle, which signifies a “Down” day. This “Inverted Hammer” is enclosed in red at the bottom of the chart.
This particular “Inverted Hammer” offers us a special treat, in that the Open and the Close on that day were very nearly the same, namely: the Open was at $35.34, while the Close was at $35.35. This circumstance qualifies this “Inverted Hammer” as a “Doji Inverted Hammer,” because in a Doji the Open and the Close are the same, or very nearly so.
We look for confirmation of the bullishness of the “Inverted Hammer” in the form of a higher Close on the next trading day. The chart clearly indicates that there was indeed a higher Close on the next trading day (as shown by the price bar enclosed in blue).
The bullish implications of this “Inverted Hammer” were fully borne out by the price rise of more than $5.00 per share between November 25 and January 3.
The second Candlestick Reversal Warning Pattern which is shown on the chart is the “Bearish Engulfing” pattern, which arose on January 3, 2012 when the “Real Body” of the tall black Candle (signifying a Down day) “engulfed” the “Real Bodies” of the preceding four Candles. This pattern is enclosed in red at the top of the chart. We can see that prices already have started Down.
William Kurtz
http://www.CandlesticksOnSteroids.com
A bearish Reversal Warning Pattern has recently arisen in the Dow Transports Index. This pattern is known as the “Osaka Clipper,” and is a variation of the well-known Candlestick “Evening Star” reversal pattern.
The “Evening Star” appears at the top of a long price advance. It is characterized by a tall white candle, signifying a strong Up day; then a Candle (the “Star”) which has a small “Real Body” (the price distance between the Open and the Close), signifying a degree of indecision, located at or near the top of the tall white candle; and then a tall black Candle, signifying a strong Down day and a reversal of trend.
The “Osaka Clipper” is like the “Evening Star,” except that it has two “Stars” between the tall while Candle and the tall black Candle. It contains much of the “DNA” of the “Evening Star,” and its bearish implications are the same as those of the “Evening Star.”
Following the appearance of this Candlestick Reversal Warning Pattern on January 6, 2012, we can reasonably expect that prices of the Transports Index will decline.
William Kurtz
http://www.CandlesticksOnSteroids.com
The attached Weekly chart of FedEx Corporation shows (enclosed in red) the “Evening Star” bearish Candlestick Reversal Warning Pattern which developed in July 2011. The “Evening Star” usually, but not always, develops at the top of a long price advance. It is characterized by a tall white candle, signifying an “Up” day, followed by a candle which features a small “Real Body” (that is, the price distance between the Open and the Close) signifying a certain degree of indecision, located at or above the top of the tall white candle; and finally a tall black candle, signifying a “Down” day and a reversal of trend from Up to Down.
The bearish implications of this “Evening Star” Candlestick Reversal Warning Pattern were fully borne out by the price decline which immediately followed it, during which the share price of FedEx fell from the High of $98.66 in July 2011 to a Low of $64.07 in early October.
William Kurtz
CandlesticksOnSteroids.com
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