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What are Bearish Candlestick Patterns & How Do You Read Them?

  Bearish Patterns are universal patterns that candlesticks can follow that signify a downwards movement of share price. Identifying these patterns may help when trying to predict which direction a stock price will go. However, it is important to remember that even though a pattern begins to form, it does not always need to finish. There is no guarantee that a pattern will follow through to the end. 

With that being said, here are some of the most popular Bearish Patterns:


Bearish Engulfing

    Above is an example of a Bearish Engulfing pattern. This pattern is identified by a red candlestick that completely encases a green candlestick. As you can see in the example above, the top of the red candlestick is above the top of the green candlestick, and the bottom of the red candlestick is below the bottom of the green candlestick. This is one of the shortest Bearish patterns but it is very important for quickly determining a stock's future direction.

Bear Flag

    Above is an example of a Bear Flag pattern, which is one of the most popular Bearish patterns due to its quick buying and selling opportunities. After the share price declines in the "pole" part of the pattern, it forms new lines of support and resistance to create the "flag" portion. Investors utilize the "flag" portion to buy at support and sell at resistance multiple time. Since the "flag" portion often repeats itself, it is sometimes possible to buy and sell the same stock multiple times for multiple profits.

Inverted Cup and Handle

    Above is an example of an Inverted Cup and Handle pattern. Some investors like the Inverted Cup and Handle pattern because of its buying potential. At the beginning of the pattern, you can see a steady increase in share price. Investors like to buy before this increase and sell at the top of the "cup" when it flattens out. They then wait for the "handle" to form with new lines of support and resistance. Then, they follow the same strategy as the Bear Flag and buy at support and sell at resistance. Some like the Inverted Cup and Handle pattern because it can allow for one large profit, followed by multiple smaller profits.

Descending Triangle

    Above is an example of a Descending Triangle pattern. Some investors like this pattern due to the relative pricing combined with the multiple trading opportunities. First off, the pattern begins with a steady decline in share price. This usually means the stock is relatively cheap and most likely has a low RSI. This may allow for a longer-term hold while the share price corrects itself back upwards. In the mean time, the candlesticks form new lines of support and resistance which allow for multiple trading opportunities, similar to the Bear Flag. Some investors like to buy shares and hold for the longer-term correction, while also buying and selling at the trend lines. All in all, a Descending Triangle is so popular due to its long-term and short-term trading potential.


    Now, you hopefully understand how to recognize and read some of the most popular Bearish Patterns. There are many other Bearish Patterns you can capitalize on so if you want to look more into this, feel free to research more. Just as another quick reminder, there is no guarantee that a pattern has to finish once it has begun forming. Trading patterns is risky and not always successful for some traders. It is important to understand this risk and do more research into a stock before just buying it for its pattern.







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