Bearish Engulfing
Bearish reversal2 sessions
An up day, then a down day that swallows it whole. Supply arriving in one session, in public.
The shape: An up session, then a down session whose body completely covers it
What it is
Yesterday closed higher than it opened. Today opened at or above yesterday's close, traded through the entire prior body, and closed below yesterday's open.
It is the cleanest two-session picture of a change in who is in charge, and it takes real selling to produce: every buyer from the prior session is underwater by the close.
How to read it
The engulfing bar's high is the level. Recovering it in the following sessions says the supply was absorbed.
Size matters the same way it does on the bullish side — a body that dwarfs the prior one is a different statement from one that clears it barely.
On the chart: a triangle below the bar for a bullish reading, above it for a bearish one, a diamond for indecision. Hover any mark to see the pattern and what qualified it — the level it formed at and the move it followed.
Using it on the wheel
On shares held after assignment, a bearish engulfing at a resistance zone describes conditions where the recent advance met supply. It is context for the covered-call decision, not the decision — the strike floor on a name you own comes from your basis, and on a multi-lot name from the blended breakeven.
For an open cash-secured put, the relevant question is unchanged: where is the strike relative to the levels below, and how much cushion is left.
Like everything in this guide, these are descriptions of conditions and reference levels — context for your own decisions, not instructions to trade.