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Coding a Bearish Engulfing Pattern with Python
The Bearish Engulfing Pattern is a Japanese candlestick pattern that signals a potential reversal of an uptrend. It consists of two candles: a small bullish candle followed by a larger bearish candle that completely engulfs the previous candle’s range. This pattern suggests a shift in market sentiment from bullish to bearish and can present a trading opportunity.
Expert traders consider the Bearish Engulfing Pattern as a reliable signal for potential bearish reversals. When combined with other technical indicators or analyses, it can increase the probability of profitable trades. However, it’s important to consider the overall market context and confirm the pattern with additional factors before making trading decisions.
Let’s consider a real-life trading example to illustrate the Bearish Engulfing Pattern. Suppose you are analyzing the daily chart of a stock and observe the following price action:
Day 1:
- Open: $60
- High: $65
- Low: $58
- Close: $64 (Bullish candle)
Day 2:
- Open: $65
- High: $68
- Low: $55
- Close: $57 (Bearish candle)
