Engulfing Line (Outside Bearish Reversal) Chart Pattern
An Engulfing Line (Bearish) indicates a possible end to the current uptrend to a new downtrend. This pattern is an indication of a financial instrument's SHORT-TERM outlook.
The Engulfing Line (Bearish) occurs when the Real Body for a price bar is larger than the Real Body for the previous price bar. In addition, for an Engulfing Line (Bearish), the Real Body of the previous session must be White (close higher than open) and the Real Body of the second session must be Black (close lower than open).
The difference in the sizes of the two Real Bodies can be an important indicator of the signifiance of the Engulfing Line. If the Real Body of the previous session is substantially smaller than the Real Body of the following session then this pattern should be considered more significant. The greater the size differeence the more significant the formation.
The longer and higher the inbound trend that leads into the Engulfing Line, the more significant the pattern.
Look for heavy volume on the following session. A noticable increase in volume from the previous few sessions is a strong indication that this pattern is more significant.
If the following session "engulfs" more than one session's Real Bodies this pattern is very significant.
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