HDFC Bank has been in an uptrend, with
buyers firmly in control. On one particular
day, the stock formed a bullish candle, closing
at ₹1920 after registering a high of ₹1950 and
a low of ₹1900. In the next session, the stock
opened higher at ₹1970, but sellers stepped in
aggressively, driving the price lower. By the end
of the session, HDFC Bank closed at ₹1890,
forming a strong bearish candle that completely
engulfed the previous day’s bullish candle.
The outcome is a candlestick pattern known as a Bearish Engulfing, defined by a large bearish candle that completely “engulfs” the prior bullish candle. Note that the engulfing only involves the “real body,” and the shadows or wicks are not considered critical.
This pattern signals a significant shift in market sentiment as intense selling pressure overwhelms buyers. The bears’ ability to erase the previous day’s gains indicates that the uptrend could be losing momentum, creating the potential for a bearish reversal.
For traders, the Bearish Engulfing pattern often acts as a reversal pattern that has the potential to reverse the uptrend.
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