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NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis

In technical analysis, a 'bearish engulfing' candlestick pattern appearing after an uptrend is characterised by which of the following?

A bearish engulfing pattern is a black candle whose real body completely covers the previous white candle's real body after an uptrend. It signals that sellers have overtaken buyers and a downward reversal may follow, unlike hammers or dojis, which have different shapes.

  1. AA small white candle followed by a larger white candle that covers it
  2. BA black candle whose real body completely covers the previous white candle's real bodyCorrect
  3. CA candle with a very long lower shadow and tiny real body at the top
  4. DTwo candles with identical opening and closing prices

Explanation

A bearish engulfing pattern forms when, after an advance, a black (bearish) candle opens higher and closes lower so that its real body engulfs the prior white candle's body. This signals possible reversal. Two white candles show continuation, a long lower shadow with small body at top is a hammer, and identical open/close describes a doji.

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