8 Best Bearish Candlestick Patterns
Updated
Hello dear traders,
Here are some educational chart patterns you must know in 2022 and 2023.
I hope you find this information educational and informative.
We are new here so we ask you to support our views with your likes and comments,
Feel free to ask any questions in the comments, and we'll try to answer them all, folks.
bearish candlestick pattern:-
Bearish candlestick patterns are either a single or a combination of candlesticks that usually point to lower price movements in a stock. They typically tell us an exhaustion story — where bulls are giving up and bears are taking over. Many of these are reversal patterns.
Hopefully, at this point in your trading career, you’ve come to know that candlesticks are essential. Not only do they provide a visual representation of price on a chart, but they tell a story.
Behind this story is the belief that the chart tells us everything we need to know: what is more important than the why. Each candlestick represents buyers and sellers and their emotions, regardless of the underlying “value” of the stock.
Check out our cheat sheet below and feel free to use it for your training!
How to trade bearish candlestick patterns:-
The best way to trade bearish candlestick patterns is by combining them with price action trading strategies. For example, if you study price action strategies like reversals or pullbacks, you can add bearish candlestick patterns to your repertoire as a way to predict future price movements.
Obviously, the prediction for a bearish candlestick pattern is to the downside. For this reason, it would behoove you to understand how to short sell, or to use these bearish strategies to know when to take profits or expect pullbacks in your long positions.
Using Bearish Candlestick patterns to buy/sell crypto:-
Generally, we like to use bearish candlestick patterns to sell cryptos. This is because they provide us with a defined area of risk with a defined reward. For example, you will see in a moment the 8 bearish candlestick patterns that we describe below. Each one provides a trigger for your entry and allows you to set your maximum exposure above the pattern.
This is an easy way to manage risk when you let candlestick patterns run. It can also give you a potential target for your entry.
Another way to use bearish candlestick patterns to buy/sell crypto is to use them as sell signals. In other words, if you are long and you see a bearish candlestick pattern, you know it is time to reverse. This can give you confidence in some of your profit before the reversal.
Which Candlestick patterns are bearish?:-
1. The Shooting Star
2. Bearish Engulfing Crack
3. Bullish Engulfing Sandwich
4. The Evening Star
5. Tweezer Top
6. Dark Cloud Cover
7. Shrinking Candles
8. Hanging Man
1. The Shooting Star:-
Candlestick pattern names usually describe a visual representation of something in real life. The Japanese were fond of naming them that way.
It is like the falling of falling star from the height of the sky.
The crypto experiences one last attempt to push higher, only to reverse itself. Hence the name, Shooting Star.
It goes up, only to fall back down.
Entry
More aggressive traders can anticipate a reversal in the form of a candle. Otherwise, you can wait until the shooting star closes, enter, and set your stop at the top of the shooting star candle.
shooting star example
BTC provided a great example of this pattern during the recent intraday session. Note that the trend was clearly up and continuing to expand. The stock makes an extreme push to new highs, then reverses on increased volume.
Also, notice the second inverted candlestick beyond the shooting star. It retracts a bit into the shooting star's wick. This is a great example of why your stop/risk should not be too close or wait for the entry of another candle.
For a more nuanced look at this pattern, read How To Trade Using The Shooting Star,
2. Bearish Engulfing Crack:-
This inverse pattern can be seen in a variety of contexts. This can happen at the open or in an extended uptrend.
The thesis behind the pattern points to strong supply levels that completely fend off bulls' attempts to push a stock higher. Result: The price opens above the previous candle, then a selling force begins.
The body of the candle completely "swallows" the previous candle, and it should close below.
Entry
Based on experience there can be some discretionary entries on this pattern. If supply is clearly visible, aggressive traders may choose to enter during the formation of a candle. This is more than an advance entry.
If trading "by the book", you may want to wait until the new low is confirmed, then enter on the next candle.
Ideally, you want to either trade in the direction of the larger trend or enter as an overbought trend reversal.
Set your stop at the body of the candle or at the high of the candle depending on its range.
Bearish Engulfing Example
A perfect example of this bearish candlestick pattern on the BTC 5-minute chart. Note that the crypto is trending down from the pre-market. It is also struggling with the VWAP, the red indicator line on the chart below.
Off the open, crypto tries to push higher, but we see some selling pressure in the upper wick of that first green 5-minute candle. Then the price moves down, smoothly taking that candle down. This opening is also a great example of a range breakdown.
Think in terms of effort versus result. Effort (volume) increased and the result (price) was a full retracement to the downside (link to effort/result). This gives us the confidence to go lower, taking on higher risks.
3. Bullish Engulfing Sandwich:-
Don't be confused by the name. It is also called a "stick sandwich". This is not a bullish pattern in this particular scenario.
The point here is that the "bullish" engulfing candle in the middle of the pattern is "sandwiched" by bearish candles.
In this example, it takes more than one supply candle to overcome demand. It takes three or four candles for the pattern to be confirmed.
First, you have a bullish engulfing candle (as opposed to the bearish engulfing candle we just identified above). Then, instead of confirming the new high, the crypto reverses again.
Entry
Entry occurs when the breakdown is confirmed — the lower low of the reversal candle. The stop can be set in the body of the candles above.
Bullish Engulfing Sandwich Example
The BTC market open right here provides a great opportunity to see this bearish candlestick pattern in action.
Note that the trend is down from the premarket. It was also continuing the downtrend from the day before.
Crypto is struggling on vwap. It tries to reverse, but pay attention to the volume on the green reversal candle. This is no match for the supply in the first 5-minute candle of the day.
The effort of that first candle dwarfs the efforts of the bulls.
Crypto then retraces vwap, its downward trajectory, and the bulls once again submit to the bears.
4. The Evening Star:-
We have included the Evening Star with the Evening Doji Star because they are very similar in both style and context.
Each is a bearish candlestick pattern.
To get into the star, you need to find a wide-bodied candle. The star itself is a narrow-bodied indecision candle that follows a broad-bodied candle to the upside.
Entry
The confirmation comes with the break of a long-standing bearish candle. A great place to enter, risking the height of the Doji candle.
This pattern works especially well at the high of the day as a trend reversal. But it could also be a trend continuation pattern if it appears at former resistance at the top of a short-term rally.
evening star example
In this intraday example the btc, we see that the uptrend has been strong. For the first hour+ of the morning, there have been few, if any, drawbacks.
However, we do see some selling pressure ahead of 10:30 AM on this 5-minute chart. Normally we could play this as a shooting star, but we did not get confirmation of a breakdown with a close below the body of that candle.
Despite the failed breakdown of Shooting Star, this is a warning sign that supply is coming into the market.
Cautious traders keeping their eyes peeled for any signs of a reversal on this highly overbought crypto will notice evening star-forming on increasing volume. Again, there is an effort (volume), but the result (price) is a short Doji candle.
How can we explain this?
It is likely that there is a lot of profit taking at this btc Evening Star candle as FOMO (fear of missing out) retail buyers drive the crypto higher. Strong hands are taking the opportunity to sell their shares.
5. Tweezer Top:-
Tweezer Top is yet another reversal pattern or continuation pattern.
The first element is a wide-body bullish candle indicating possible exhaustion of the uptrend. There is then no attempt to continue lower or higher, so a reversal occurs.
Volume is increasing during both of these candles as supply is added to the market as weak hands are tempted to continue buying here.
As a bearish pattern, the two candles should share roughly the same high, if possible.
Entry
Entry can be made on a close below the reversal candle with the stop set at higher.
tweezer top example
Take a look at this BTC Tweezer Top. Can you see the green and red candles representing the two sides of the pair of tweezers appropriately?
Depending on the range of the candles, you can enter aggressively as the tweezers are forming, especially if the supply appears heavy.
You can wait until the candle closes for your entry and closes at the highest level of the day or the body of the tweezer top. This is discretionary depending on the risk/reward you are looking for, as well as your risk personality and position size.
As you can see from the chart, at times vwap can be a large target area (red line).
6. Dark Cloud Cover:-
Dark Cloud Cover is the opposite of a bullish reversal pattern called the Piercing Line. For the bearish pattern, it must first have a solid green or white bar continuing the uptrend.
After the bullish candle closes, we expect to see another candle try to make new highs. This new candle fails, then closes more than midway into the body of the 1st candle. Hence, the overhead supply is called “dark cloud cover.”
One of the best ways to play this pattern is in an overall downtrend during a short-term reversal. As the crypto tries to rally into resistance, you can anticipate the end of the rally.
Entry
Positions should be entered as the stock breaks the prior bar with stops set at the high of the candle.
Dark Cloud Cover Example
Occasionally the market gifts us with a nice double-top failure in an overall downtrend. BTC gave us this opportunity intraday recently as it pulled back from the morning lows, only to find resistance at vwap.
As you can see, BTC was struggling to overcome vwap on the heavy volume on the first try. The second try gave us a beautiful confirmation of the Dark Cloud Cover pattern.
7. Shrinking Candles:-
Contraction candles are a classic example of effort versus result. This is a bearish reversal candlestick pattern usually accompanied by a huge volume signature below. The amount of effort pushing crypto to new highs is on the rise. Although the result is decreasing.
Given the context, this should mean that a considerable amount of selling pressure is building up on volume as the price continues to make a slow upward move. This selling pressure is counteracting the demand.
Once the bulls realize this, it is often too late. Without proper buying on the bottom, the result could be disastrous for long chasers wrongly assuming there is upward momentum.
Entry
As you look at the chart, hopefully, you can pinpoint a large short entry as the last green candlestick broke to the downside. The double top is clear, and a close risk/stop can be set on the high.
Receding Candles Example
Here is a real example from the 5-minute chart of BTC. As you study this chart, pay attention to the volume and how it corresponds with each candle.
As you can see, the greatest amount of volume comes as BTC tries to rally above pre-market highs. By doing this the candles start shrinking.
8. Hanging Man:-
The Hanging Man is visually similar to the Hammer Pattern. The hammer is usually bullish at the end of a downtrend. However, the Hanging Man is a bearish candlestick pattern at the end of an uptrend.
Selling pressure is the key to recognizing this pattern.
Inside the candlestick formation, there is considerable selling pressure, to begin with.
Closing at higher levels can be misleading as the selling pressure mostly dissipates as it gains momentum.
Many times this is an opportunity to get stuck in the long run which can lead to the belief that demand was outstripping supply.
However, the supply is still on.
If they bought longs on the way back up are overcome on the next candle, they could be locked out of their entries and the selling pressure would increase as the cryptocurrency fizzled out.
Entry
Ideally, the next candle after the close of the Hanging Man will provide a risk/reward entry closest to the top.
If you are not quick enough to enter near Hanging Man and take high risks, it provides a right shoulder for later entry.
hanging man example
Check out this beautiful uptrend on the recent intraday chart of BTC. It appears that there is nothing stopping the upward momentum. That is until we get to the Hanging Man, which signals the top for us.
Trade with care.
If you like our content, please feel free to support our page with a like, comment
Hit the like button if you like it and share your charts in the comments section.
Thank you
Here are some educational chart patterns you must know in 2022 and 2023.
I hope you find this information educational and informative.
We are new here so we ask you to support our views with your likes and comments,
Feel free to ask any questions in the comments, and we'll try to answer them all, folks.
bearish candlestick pattern:-
Bearish candlestick patterns are either a single or a combination of candlesticks that usually point to lower price movements in a stock. They typically tell us an exhaustion story — where bulls are giving up and bears are taking over. Many of these are reversal patterns.
Hopefully, at this point in your trading career, you’ve come to know that candlesticks are essential. Not only do they provide a visual representation of price on a chart, but they tell a story.
Behind this story is the belief that the chart tells us everything we need to know: what is more important than the why. Each candlestick represents buyers and sellers and their emotions, regardless of the underlying “value” of the stock.
Check out our cheat sheet below and feel free to use it for your training!
How to trade bearish candlestick patterns:-
The best way to trade bearish candlestick patterns is by combining them with price action trading strategies. For example, if you study price action strategies like reversals or pullbacks, you can add bearish candlestick patterns to your repertoire as a way to predict future price movements.
Obviously, the prediction for a bearish candlestick pattern is to the downside. For this reason, it would behoove you to understand how to short sell, or to use these bearish strategies to know when to take profits or expect pullbacks in your long positions.
Using Bearish Candlestick patterns to buy/sell crypto:-
Generally, we like to use bearish candlestick patterns to sell cryptos. This is because they provide us with a defined area of risk with a defined reward. For example, you will see in a moment the 8 bearish candlestick patterns that we describe below. Each one provides a trigger for your entry and allows you to set your maximum exposure above the pattern.
This is an easy way to manage risk when you let candlestick patterns run. It can also give you a potential target for your entry.
Another way to use bearish candlestick patterns to buy/sell crypto is to use them as sell signals. In other words, if you are long and you see a bearish candlestick pattern, you know it is time to reverse. This can give you confidence in some of your profit before the reversal.
Which Candlestick patterns are bearish?:-
1. The Shooting Star
2. Bearish Engulfing Crack
3. Bullish Engulfing Sandwich
4. The Evening Star
5. Tweezer Top
6. Dark Cloud Cover
7. Shrinking Candles
8. Hanging Man
1. The Shooting Star:-
Candlestick pattern names usually describe a visual representation of something in real life. The Japanese were fond of naming them that way.
It is like the falling of falling star from the height of the sky.
The crypto experiences one last attempt to push higher, only to reverse itself. Hence the name, Shooting Star.
It goes up, only to fall back down.
Entry
More aggressive traders can anticipate a reversal in the form of a candle. Otherwise, you can wait until the shooting star closes, enter, and set your stop at the top of the shooting star candle.
shooting star example
BTC provided a great example of this pattern during the recent intraday session. Note that the trend was clearly up and continuing to expand. The stock makes an extreme push to new highs, then reverses on increased volume.
Also, notice the second inverted candlestick beyond the shooting star. It retracts a bit into the shooting star's wick. This is a great example of why your stop/risk should not be too close or wait for the entry of another candle.
For a more nuanced look at this pattern, read How To Trade Using The Shooting Star,
2. Bearish Engulfing Crack:-
This inverse pattern can be seen in a variety of contexts. This can happen at the open or in an extended uptrend.
The thesis behind the pattern points to strong supply levels that completely fend off bulls' attempts to push a stock higher. Result: The price opens above the previous candle, then a selling force begins.
The body of the candle completely "swallows" the previous candle, and it should close below.
Entry
Based on experience there can be some discretionary entries on this pattern. If supply is clearly visible, aggressive traders may choose to enter during the formation of a candle. This is more than an advance entry.
If trading "by the book", you may want to wait until the new low is confirmed, then enter on the next candle.
Ideally, you want to either trade in the direction of the larger trend or enter as an overbought trend reversal.
Set your stop at the body of the candle or at the high of the candle depending on its range.
Bearish Engulfing Example
A perfect example of this bearish candlestick pattern on the BTC 5-minute chart. Note that the crypto is trending down from the pre-market. It is also struggling with the VWAP, the red indicator line on the chart below.
Off the open, crypto tries to push higher, but we see some selling pressure in the upper wick of that first green 5-minute candle. Then the price moves down, smoothly taking that candle down. This opening is also a great example of a range breakdown.
Think in terms of effort versus result. Effort (volume) increased and the result (price) was a full retracement to the downside (link to effort/result). This gives us the confidence to go lower, taking on higher risks.
3. Bullish Engulfing Sandwich:-
Don't be confused by the name. It is also called a "stick sandwich". This is not a bullish pattern in this particular scenario.
The point here is that the "bullish" engulfing candle in the middle of the pattern is "sandwiched" by bearish candles.
In this example, it takes more than one supply candle to overcome demand. It takes three or four candles for the pattern to be confirmed.
First, you have a bullish engulfing candle (as opposed to the bearish engulfing candle we just identified above). Then, instead of confirming the new high, the crypto reverses again.
Entry
Entry occurs when the breakdown is confirmed — the lower low of the reversal candle. The stop can be set in the body of the candles above.
Bullish Engulfing Sandwich Example
The BTC market open right here provides a great opportunity to see this bearish candlestick pattern in action.
Note that the trend is down from the premarket. It was also continuing the downtrend from the day before.
Crypto is struggling on vwap. It tries to reverse, but pay attention to the volume on the green reversal candle. This is no match for the supply in the first 5-minute candle of the day.
The effort of that first candle dwarfs the efforts of the bulls.
Crypto then retraces vwap, its downward trajectory, and the bulls once again submit to the bears.
4. The Evening Star:-
We have included the Evening Star with the Evening Doji Star because they are very similar in both style and context.
Each is a bearish candlestick pattern.
To get into the star, you need to find a wide-bodied candle. The star itself is a narrow-bodied indecision candle that follows a broad-bodied candle to the upside.
Entry
The confirmation comes with the break of a long-standing bearish candle. A great place to enter, risking the height of the Doji candle.
This pattern works especially well at the high of the day as a trend reversal. But it could also be a trend continuation pattern if it appears at former resistance at the top of a short-term rally.
evening star example
In this intraday example the btc, we see that the uptrend has been strong. For the first hour+ of the morning, there have been few, if any, drawbacks.
However, we do see some selling pressure ahead of 10:30 AM on this 5-minute chart. Normally we could play this as a shooting star, but we did not get confirmation of a breakdown with a close below the body of that candle.
Despite the failed breakdown of Shooting Star, this is a warning sign that supply is coming into the market.
Cautious traders keeping their eyes peeled for any signs of a reversal on this highly overbought crypto will notice evening star-forming on increasing volume. Again, there is an effort (volume), but the result (price) is a short Doji candle.
How can we explain this?
It is likely that there is a lot of profit taking at this btc Evening Star candle as FOMO (fear of missing out) retail buyers drive the crypto higher. Strong hands are taking the opportunity to sell their shares.
5. Tweezer Top:-
Tweezer Top is yet another reversal pattern or continuation pattern.
The first element is a wide-body bullish candle indicating possible exhaustion of the uptrend. There is then no attempt to continue lower or higher, so a reversal occurs.
Volume is increasing during both of these candles as supply is added to the market as weak hands are tempted to continue buying here.
As a bearish pattern, the two candles should share roughly the same high, if possible.
Entry
Entry can be made on a close below the reversal candle with the stop set at higher.
tweezer top example
Take a look at this BTC Tweezer Top. Can you see the green and red candles representing the two sides of the pair of tweezers appropriately?
Depending on the range of the candles, you can enter aggressively as the tweezers are forming, especially if the supply appears heavy.
You can wait until the candle closes for your entry and closes at the highest level of the day or the body of the tweezer top. This is discretionary depending on the risk/reward you are looking for, as well as your risk personality and position size.
As you can see from the chart, at times vwap can be a large target area (red line).
6. Dark Cloud Cover:-
Dark Cloud Cover is the opposite of a bullish reversal pattern called the Piercing Line. For the bearish pattern, it must first have a solid green or white bar continuing the uptrend.
After the bullish candle closes, we expect to see another candle try to make new highs. This new candle fails, then closes more than midway into the body of the 1st candle. Hence, the overhead supply is called “dark cloud cover.”
One of the best ways to play this pattern is in an overall downtrend during a short-term reversal. As the crypto tries to rally into resistance, you can anticipate the end of the rally.
Entry
Positions should be entered as the stock breaks the prior bar with stops set at the high of the candle.
Dark Cloud Cover Example
Occasionally the market gifts us with a nice double-top failure in an overall downtrend. BTC gave us this opportunity intraday recently as it pulled back from the morning lows, only to find resistance at vwap.
As you can see, BTC was struggling to overcome vwap on the heavy volume on the first try. The second try gave us a beautiful confirmation of the Dark Cloud Cover pattern.
7. Shrinking Candles:-
Contraction candles are a classic example of effort versus result. This is a bearish reversal candlestick pattern usually accompanied by a huge volume signature below. The amount of effort pushing crypto to new highs is on the rise. Although the result is decreasing.
Given the context, this should mean that a considerable amount of selling pressure is building up on volume as the price continues to make a slow upward move. This selling pressure is counteracting the demand.
Once the bulls realize this, it is often too late. Without proper buying on the bottom, the result could be disastrous for long chasers wrongly assuming there is upward momentum.
Entry
As you look at the chart, hopefully, you can pinpoint a large short entry as the last green candlestick broke to the downside. The double top is clear, and a close risk/stop can be set on the high.
Receding Candles Example
Here is a real example from the 5-minute chart of BTC. As you study this chart, pay attention to the volume and how it corresponds with each candle.
As you can see, the greatest amount of volume comes as BTC tries to rally above pre-market highs. By doing this the candles start shrinking.
8. Hanging Man:-
The Hanging Man is visually similar to the Hammer Pattern. The hammer is usually bullish at the end of a downtrend. However, the Hanging Man is a bearish candlestick pattern at the end of an uptrend.
Selling pressure is the key to recognizing this pattern.
Inside the candlestick formation, there is considerable selling pressure, to begin with.
Closing at higher levels can be misleading as the selling pressure mostly dissipates as it gains momentum.
Many times this is an opportunity to get stuck in the long run which can lead to the belief that demand was outstripping supply.
However, the supply is still on.
If they bought longs on the way back up are overcome on the next candle, they could be locked out of their entries and the selling pressure would increase as the cryptocurrency fizzled out.
Entry
Ideally, the next candle after the close of the Hanging Man will provide a risk/reward entry closest to the top.
If you are not quick enough to enter near Hanging Man and take high risks, it provides a right shoulder for later entry.
hanging man example
Check out this beautiful uptrend on the recent intraday chart of BTC. It appears that there is nothing stopping the upward momentum. That is until we get to the Hanging Man, which signals the top for us.
Trade with care.
If you like our content, please feel free to support our page with a like, comment
Hit the like button if you like it and share your charts in the comments section.
Thank you
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1. The Shooting StarTrade active
2. Bearish Engulfing CrackTrade active
3. Bullish Engulfing SandwichTrade active
4. The Evening StarTrade active
5. Tweezer TopTrade active
6. Dark Cloud CoverTrade active
7. Shrinking CandlesTrade active
8. Hanging ManTrade active
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