8 Best Bearish CandlestickPatterns for Day Trading[Free Cheat Sheet!]

Recently, we discussed the general history of candlesticks andtheir patterns in a prior post. We also have a great tutorialon the most reliable bullish patterns. But for today, we’regoing to dig deeper, and more practical, explaining 8 bearishcandlestick patterns every day trader should know.

We’ll cover the following:

What these patterns look likeThe criteria for confirming themThe story these candles tellHow to set entries and risk for eachSome common mistakes when interpreting them.

Also, feel free to use our quick reference guide below forbearish candlestick patterns! Be sure to save the image foryour use with your trading and training in the market!

What Bearish Candlesticks Tell UsHopefully at this point in your trading career you’ve come toknow that candlesticks are important. Not only do they providea visual representation of price on a chart, but they tell astory.

Behind this story is the belief that the chart tells useverything we need to know: the what being more important thanthe why. Each candlestick is a representation of buyers andsellers and their emotions, regardless of the underlying“value” of the stock.

Bearish candlestick patterns typically tell us an exhaustionstory — where bulls are giving up and bears are taking over.Many of these are reversal patterns.

Check out or cheat sheet below and feel free to use it foryour training!

https://tradingsim.com/wp-content/uploads/2021/06/BearishCandlestickInfographic2.png

Without further ado, let’s dive into the 8 bearish candlestickpatterns you need to know for day trading!

1. The Shooting Star

In case you were wondering, the names of candlestick patternsusually describe a visual representation to something in reallife. The Japanese were fond of naming them that way.

The shooting star is no exception.

When it occurs, it will be at the height of a current uptrend— typically an extended trend.

It’s a lot like a shooting star falling from the heights ofthe heavens.

At the end of that trend, the stock experiences one lasteffort to push higher, only to reverse on itself. Hence thename, shooting star.

It goes up, only to fall back.

EntryWhere would you enter?

More aggressive traders may anticipate the reversal as thecandle is forming. Otherwise, you can wait until the close ofthe shooting star, enter, and set your stop at the high of theshooting star candle.

Shooting Star ExampleAMC provides a great example of this pattern during a recentintraday session. Notice that the trend was clearly upward andbecoming extended. The stock makes a climactic push to newhighs, then reverses on increased volume.

AMC with a fantastic example of a Shooting Star

Also, notice that the second reversal candle beyond theshooting star. It retraces slightly into the wick of theshooting star. This is a great example of why your stops/riskneed not be too close, or wait for entry on the second candle.

For a more granular look at this pattern, check out our poston how to trade using the Shooting Star.

2. Bearish Engulfing Crack

This reversal pattern can be seen in different contexts. Itcan occur off the open, or in an extended uptrend.

The thesis behind the pattern points to strong supply levelsthat completely surpass the effort of bulls to push a stockupwards. The result: the price opens above the precedingcandle, then commences to sell off forcefully.

The body of the candle completely “engulfs” the prior candle,and should close below it.

EntryThere can be a few discretionary entries on this pattern

depending on experience. Aggressive traders may choose toenter as the candle is forming, if supply is clearly visible.This is more of an anticipatory entry.

If trading “by the book”, you may want to wait until the newlow is confirmed, then enter on the next candle.

Ideally, you want to trade in either the direction of thelarger trend, or enter as an overextended trend reversal.

Set your stop in the body of the candle or at the high of thecandle depending on its range.

Bearish Engulfing ExamplesFCEL is a perfect example of this bearish candlestick patternon the 5-min chart. Notice that the stock is trending downwardfrom the pre-market. It is also struggling with VWAP, the redindicator line on the chart below.

FCEL with an opening range breakdown and Bearish EngulfingCrack

Off the open, the stock tries to push higher, but we noticesome selling pressure in the upper wick of that first green 5-minute candle. The price then moves lower, engulfing thatcandle with ease of movement to the downside.

This just happens to be a great example of an Opening RangeBreakdown as well.

BA provides us with another look at this bearish candlestickpattern in a different context.

BA with an overextended bearish engulfing candle

Notice the reversal from an extended intraday run here. Justlike the example above, the 5-minute candle completely engulfsthe prior candle. This time, it is with increasing volume.

What does that tells us?

Think in terms of effort vs. result. The effort (volume)increased and the result (price) was a complete retracementdownward (link to effort/result).

This gives us the confidence to go short, risking toward thehighs.

3. Bullish Engulfing Sandwich

Do not be confused by the name. This is also called a “sticksandwich”. It is not a bullish pattern in this particularscenario.

The point here is that the “bullish” engulfing candle in themiddle of the pattern is “sandwiched” by bearish candles.

In this instance, it takes more than a single supply candle toovercome the demand. It takes three or four candles for thepattern to confirm.

First, you have what appears to be a bullish engulfing candle(the opposite of the bearish engulfing candle we justidentified above). Then, instead of confirming new highs, thestock reverses again.

Context is everything here. In the example below, you’ll seethat the general trend is downward. For this reason, thebullish engulfing sandwich can be thought of as a continuationpattern.

EntryEntry is on confirmation of a breakdown — lower lows on thereversal candle. Stops can be set in the body of the candlesabove.

Bullish Engulfing Sandwich ExampleFUBO provides a fantastic opportunity to see this bearishcandlestick pattern in action right at the opening of themarket.

FUBO intraday Bullish Engulfing Sandwich pattern

Notice that the trend is downward from the premarket. It wasalso continuing downward from the day before.

The stock stalls at vwap, struggling. It tries to reverse, butnotice the volume on the green reversal candle. It is no matchfor the supply in the first 5-minute candle of the day.

The effort in that first candle dwarfs the efforts of thebulls.

The stock then reclaims vwap, its downward trajectory, and thebulls submit to the bears one more time.

Learn more about this bearish pattern and it’s bullishcounterpart in our blog post covering the Stick Sandwich.

4. The Evening Star

We’ve included the Evening Star with the Evening Doji Starbecause they are very similar, both in style and in context.

Each are bearish candlestick patterns.

Leading into the star, you’ll need to spot a wide bodiedcandle. The star itself is the narrow body indecision candlethat follows the upward wide-body candle.

EntryThe confirmation comes with the breakdown on the longer bodiedbearish candle. A great place to enter, risking off the highsof the doji candle.

This pattern works particular well at the high of the day as atrend reversal. But it can also be a trend continuation

pattern if it appears at the top of a short-lived rally intoprior resistance.

Evening Star ExampleIn this intraday example with GME, we notice that the upwardtrend has been strong. For the first hour+ of the morning,there have been few, if any pullbacks.

GME with an evening star pattern playing out intraday

However, we notice some selling pressure coming on this 5-minute chart just before 10:30am. Typically we might haveplayed that as a shooting star, but we never got the breakdownconfirmation with a close below the body of that candle.

Despite the failed breakdown on the shooting star, it is awarning sign that supply is coming into the market.

The alert trader keeping his/her eyes open for any signs ofreversal on this overextended stock would notice the EveningStar forming on increasing volume. Again, the effort (volume)is there, but the result (price) is a small doji candle.

How can we interpret this?

It is likely that there is plenty of profit taking going intothis GME Evening Star candle as FOMO (fear of missing out)retail buyers chase the stock higher. Strong hands are takingthe opportunity to sell their shares.

This gives the attentive trader an opportunity to capitalizeby going short.

5. Tweezer Top

The tweezer top is yet another reversal pattern orcontinuation pattern.

The 1st element is the wide body bullish candle signalingpotential exhaustion in an uptrend. This is followed by weakor no effort to continue higher, hence the reversal.

Ideally, volume is increasing during both of these candles assupply is added to the market as weak hands are tempted tocontinue buying here.

As a bearish pattern, the two candles should share roughtlythe same high if possible.

EntryEntry can be made on a close below the reversal candle with astop set at the high.

Tweezer Top ExampleTake a look at this AMC tweezer top. Can you see the green andred candles providing the proper representation of the twosides of a pair of tweezers?

AMC putting in a tweezer top pattern intraday

Depending on the range of the candles, you can enteraggressively as the tweezer is forming, especially if supplyappears heavy.

Otherwise, you can wait until the candle closes for your entryand set a stop at the high of day, or in the body of thetweezer top. This is discretionary depending on therisk/reward you are looking for, as well as your riskpersonality and position size.

As you can see from the chart, often times vwap can be a greattarget area (red line).

6. Dark Cloud Cover

Dark Cloud Cover is the opposite of a bullish reversal patterncalled Piercing Line. For the bearish pattern, it must firsthave a solid green or white bar continuing the uptrend.

After the bullish candle closes, we expect to see anothercandle try to make new highs. This new candle fails, thencloses more than midway into the body of the 1st candle.Hence, the overhead supply is called “dark cloud cover.”

One of the best ways to play this pattern is in an overalldowntrend during a short term reversal. As the stock tries torally into resistance, you can anticipate the end of therally.

EntryPositions should be entered as the stock breaks the prior barwith stops set at the high of the candle.

Dark Cloud Cover ExampleOccasionally the market gifts us with a nice double topfailure in an overall downtrend. RIOT gave us this opportunityintraday recently as it pulled back from the morning lows,only to find resistance at vwap.

RIOT forming a double top with bearish Dark Cloud Covercandlestick pattern

As you can see, RIOT was struggling to overcome vwap on heavyvolume the first try. The second try gave us a beautifulconfirmation with the Dark Cloud Cover pattern.

7. Shrinking Candles

Shrinking candles are a classic example of effort vs result.It is a bearish reversal candlestick pattern usuallyaccompanied by a huge volume signature below.

The understanding is that the amount of effort to push thestock to new highs is increasing. However, the result is

decreasing.

How do we interpret this?

Given the context, it should imply that a considerable amountof selling pressure is adding to the volume as price movessluggishly upward. This selling pressure is counteracting thedemand.

Why else would the candles be shrinking?

Once bulls realize this, it is often too late. Without properbuying underneath, the result can be devastating for longchasers wrongly assuming there is upward momentum.

In essence, there is no synchronicity between volume andprice. They are at odds with each other on the way up. Ananomaly, if you will.

Shrinking Candles ExampleHere is real example from the 5-minute chart of BTBT. As youstudy this chart, pay close attention to the volume and how itcorresponds with each candle.

BTBT displaying a Shrinking Candles pattern intraday

As you can see, the largest amount of volume comes as BTBTtries to rally above the pre-market highs. As it does, thecandles begin to shrink.

Momentum is being lost as gravity, supply in this case,strangles this rocket off the morning lows. Strong hands takeadvantage of morning break out buyers, who are left holdingthe bags as the stock fades the rest of the day.

EntryAs you look at the chart, hopefully you can pinpoint a greatshort entry as the last green candle is broken to thedownside. The double top is clear, and a close risk/stop canbe set at the highs.

8. Hanging Man

Hanging Man is very similar visually to the Hammer pattern.The Hammer is usually bullish at the end of a down trend.However, the Hanging Man is a bearish candlestick pattern atthe end of an uptrend.

Selling pressure is the key to recognizing this pattern.

Inside the formation of the candle, there is considerableselling pressure to begin with.

The close at the highs can be misleading in that the selling

pressure is mostly overcome as it rallies.

Often times this results in an opportunity to trap longs whomay believe the supply was overcome by demand.

However, the supply is still present.

If longs who bought on the way back up are overcome on thenext candle, they are likely trapped from their entries andwill add to the selling pressure as the stock capitulates.

Hanging Man ExampleCheck this beautiful uptrend on the recent intraday chart ofPLUG. It appears there is nothing to stop the upward momentum.That is, until we get the Hanging Man, signaling the top forus.

PLUG 5-minute chart displaying a Hanging Man reversal pattern

EntryIdeally the next candle after the close of the Hanging Manwould provide the nearest risk/reward entry at the top.

If you aren’t fast enough to enter on the close of the HangingMan and risk to the highs, it does offer a right shoulder forentry later.

How To Practice CandlestickPatternsSo there we have 8 of the most common bearish candlestickpatterns. Now you’re probably wondering how to spot them inreal time.

We do have a handful of quick reference guides. These can be agreat resource in the moment if you are unsure.

However, learning the context of these patterns is paramount.Otherwise, you may find yourself trading them without properconfirmation. It takes time and experience.

How do you speed up the learning curve?

There is no better way to rapidly increase your exposure tothese patterns than in a simulator.

Imagine being able to replay the market for any particular dayup to three years in the past. You can do it in your sparetime.

Pick a day, pick a pattern, pull up the scanner, and takenotes every time you see the pattern play out well.

As you practice, ask yourself these questions:

Where did the pattern occur in a trend?Did the pattern confirm?How was volume associated with the confirmation of thepattern?Would the risk/reward have been worth it for the trade?

ConclusionWe hope you’ll find this lesson a beneficial tool in yourshort-trading-strategy belt. Nothing beats the ability to read

charts well and bearish candlestick patterns are an integralpart to that process.