Bearish candlestick patterns you should know

Bearish candlestick patterns are among the fundamental tools of technical analysis that traders use to identify potential downward movements. These chart formations can be applied across various markets, including crypto trading. They help interpret trend reversal signals more effectively. But what exactly is a bearish pattern and how can you use it in trading? This article introduces the most important bearish candlestick patterns, their significance, and practical tips for applying them in your trading strategy.

• Bearish candlestick patterns are chart formations that indicate potential downward movements and trend reversal signals.

• These patterns are especially useful in crypto trading to identify selling pressure and market trends early on.

• The strongest bearish patterns include the bearish engulfing candle, the three black crows pattern and the dark cloud cover.

• When combined with other indicators, bearish candle formations help traders minimise risk and make strategic decisions.

The 10 strongest bearish candlestick patterns

Here are the 10 strongest bearish candlestick patterns that can help you identify potential downward movements and trend reversal signals at an early stage:

1. Bearish harami pattern: a small candle body within the previous larger body, indicating a possible trend reversal

2. Three black crows pattern: three consecutive long bearish candles that point to a strong downward movement

3. Falling three methods pattern: a continuation pattern where a longer bearish candle is followed by smaller candles in the opposite direction before the downtrend continues

4. Dark cloud cover: a bearish candle that covers half the body of the previous bullish candle, indicating a trend reversal

5. Hanging man pattern: a single candle pattern with a small body and long lower shadow, which after an uptrend suggests a possible reversal

6. Bearish engulfing candle: a larger bearish candle that completely engulfs the body of the previous bullish candle and signals a trend reversal

7. The evening star: a three-part pattern that occurs after an uptrend and suggests a strong bearish market reversal

8. Shooting star: a single pattern with a small body and long upper shadow, which after an uptrend indicates a potential downtrend

9. Bearish doji star: a doji candle that appears after an uptrend and signals a possible reversal

10. Gravestone doji: a doji candle with a long upper shadow and no lower shadow, indicating a downtrend following an uptrend

These bearish candlestick patterns are useful tools for identifying downtrends early and making informed trading decisions. Each of these patterns provides traders with helpful signals for ideal entry or exit points and enables sound decision-making.

1. The bearish harami pattern

The bearish harami pattern is an important bearish candlestick formation and is considered a sign of a possible trend reversal. The chart formation consists of two candles: a larger green candle followed by a smaller red ‘shortline candle’ that comprises only about 25% of the ‘real body’ of the previous candle. This formation signals that selling pressure is increasing and a downward movement is likely.

For crypto traders, the bearish harami pattern suggests that the market could be entering a bearish phase. Just as the bullish harami pattern indicates new highs, the bearish harami pattern may point to new lows, making it a useful early warning sign in a downtrend.

2. Three black crows pattern

The three black crows pattern is one of the classic bearish candle patterns and is interpreted as a clear sign of a potential downward movement. This formation consists of three consecutive red candles with short wicks. This constellation shows that selling pressure is increasing steadily over three days, with each closing price lower than the last.

Typically, the formation ends with a small green candle and a long upper shadow, known as an ‘inverted hammer’ or ‘shooting star’. This candle indicates that the bears continue to dominate the market despite a brief increase in buying pressure. For crypto traders, the three black crows pattern can be a strong signal of a continuing downtrend and possibly an impending bear market.

3. Falling three methods pattern

The falling three methods pattern is a bearish candlestick pattern and the counterpart to the bullish rising three methods formation. As a continuation pattern, it indicates that an existing downtrend is likely to continue.

Within this formation are three smaller green candles that represent a short-term bullish trend. However, the range of price movements in these green candles gradually decreases, suggesting weakening buying pressure. The final red candle opens at the same level as the previous day and closes significantly lower, confirming the continuation of the downtrend.

Traders interpret the falling three methods pattern as a sign that a brief upward movement is ending and the bears are regaining control of the market. This formation suggests that prices may enter another downward movement.

4. The dark cloud cover

The dark cloud cover is a popular bearish candlestick pattern often used to analyse shorter timeframes, especially on crypto exchanges where trades are often short-term and high-frequency. This two-day trend reversal pattern typically occurs at the end of an uptrend and signals a potential shift to a downward movement.

Like its bullish counterpart, the piercing line, the opening price of the second candle is above the closing price of the previous green candle. However, the second red candle closes below the midpoint of the first candle. This movement shows that the bulls initially attempted to push the price higher, but the bears ultimately took control. The dark cloud cover formation therefore suggests a potential downtrend as selling pressure increases and the upward movement loses momentum.

5. Hanging man pattern

The hanging man is a classic bearish candlestick pattern that typically appears at the end of an uptrend and signals that the market may have reached its peak, with a downtrend likely to follow. The hanging man formation consists of a single candle with a small body and a long lower shadow, indicating growing selling interest. The upper shadow is usually absent or very small, meaning that despite strong demand, selling pressure dominated and the price ultimately fell.

This chart formation is often interpreted as the bears overpowering the bulls, with selling pressure rising. While the hanging man may occasionally appear within an uptrend, it often indicates that a reversal is imminent. For traders speculating on falling prices, the hanging man formation is a useful signal for a well-timed entry or exit.

6. Bearish engulfing candle

The bearish engulfing candle is a two-day reversal pattern made up of a smaller green candle followed by a larger red candle. The red candle engulfs the body of the green candle entirely, indicating that the bears are dominating the market. This sudden shift from buying to selling pressure often signals a trend reversal, especially when the pattern appears after a prolonged uptrend.

For traders in crypto trading, the bearish engulfing candle provides a strong signal that the upward movement is losing momentum and a downtrend could be imminent. This formation is frequently an entry signal for short positions or an opportunity to hedge existing positions.

7. The evening star

The evening star pattern is a three-part bearish candlestick pattern that signals a potential trend reversal from an uptrend to a downtrend. It consists of a larger green candle, followed by a small candle (often a doji), and a final larger red candle body. This configuration shows that initial buying pressure is gradually fading as the bears take control.

The small candle in the middle of the formation indicates market indecision, and the following red candle confirms the reversal by closing below the body of the first candle. In crypto trading, the evening star pattern is often seen as a sign that the upward movement has exhausted itself and a downtrend may be ahead. This formation gives traders the chance to consider sell positions or secure profits.

8. Shooting star

The shooting star is a bearish candle pattern that often appears near the end of an uptrend and signals a possible reversal. This pattern features a candle with a small body near the day’s low and a long upper shadow. The long shadow shows that the bulls initially pushed the price up significantly, but the bears regained control and drove the price back down.

The shooting star formation suggests that buying interest is waning while selling pressure is increasing, providing a potential signal for traders to prepare for a downward movement. In crypto trading, this chart pattern is often used as an indicator of an upcoming trend reversal, especially when it follows a strong upward trend.

9. Bearish doji star

The bearish doji star is a candlestick formation that commonly appears at the end of an uptrend and signals a potential trend reversal. It consists of a larger green candle followed by a doji candle, which indicates market uncertainty. The doji candle opens above the closing price of the first candle, but the candle body closes at nearly the same level, suggesting a loss of buying pressure. 

This bearish candlestick pattern shows that the bulls are struggling to push the price higher. The formation indicates a possible reversal if the next trading day features a red candle. For crypto traders, the bearish doji star can be an important warning signal that a downward movement may be imminent and that selling pressure is increasing.

10. Gravestone doji

The gravestone doji is a distinctive candlestick pattern recognisable by its shape: it consists of a long upper shadow and a barely visible or completely absent lower shadow, with the opening and closing prices being identical or nearly so. This formation occurs when the price rises sharply during the session, but the bears gain control by the end and push the price back to the opening level.

The long upper shadow signals an attempt by the bulls to drive the market higher, but without long-term success. The absence of a lower shadow in the formation shows there was little buying pressure to support the price after it dropped. This bearish candlestick pattern is often a strong indication that buying interest has been exhausted and a downtrend may be imminent.

In crypto trading, the gravestone doji is seen as a significant warning signal at the end of an uptrend, as it suggests that the bears have taken control and a reversal into a downtrend is likely.

How bearish candlestick patterns are used in trading

Bearish candlestick patterns are used in trading to identify potential trend reversals and ideal entry or exit points for short positions. They indicate that selling pressure is increasing and a downtrend may be approaching.

Traders analyse these patterns especially in combination with other trading indicators to confirm the likelihood of a reversal and to minimise risk.

Tips for using bearish candlestick patterns in crypto trading

• Timeframe awareness: bearish patterns on longer timeframes such as daily or weekly charts are often more reliable than those on shorter timeframes.

• Wait for confirmation: ideally, a bearish formation should be confirmed by another bearish candle or other indicators such as trading volume.

• Don’t view in isolation: bearish candlestick patterns work best when combined with other technical analysis tools like trendlines or moving averages.

• Secure positions: when identifying a bearish pattern, it may be sensible to set stop-loss orders to reduce risk in case of potential downward movements.

In crypto trading, bearish candlestick patterns are especially useful as the market is often volatile and quick decisions are required. Understanding such patterns helps traders better assess market movements and adjust strategies accordingly.

Want to optimise your crypto trading? Bitpanda Fusion is the ideal platform for active traders. It enables more frequent trades with larger volumes – perfect for any strategy. Benefits: no transaction fees, quick upgrades, real-time analytics and maximum security. Use Bitpanda Fusion’s chart analysis tools to manage your trading with precision.

Conclusion: how to use bearish candlestick patterns

Bearish candlestick patterns are an essential tool for traders to recognise trend reversal signals early and assess potential downward movements. Each formation provides specific insights into market direction and helps with informed decision-making. Whether you want to identify a reversal after an uptrend or the continuation of a downtrend – analysing these patterns helps you reduce risk and find targeted entry or exit points. With a solid understanding of the various bearish patterns and how to interpret them, you can refine your trading strategy and respond more effectively to volatile market movements.

Frequently asked questions about bearish candlestick patterns

Here are the answers to the most common questions about bearish candlestick patterns.

What is a bearish candlestick pattern?

A bearish candlestick pattern is a candlestick chart formation that indicates increasing selling pressure in a market and the possibility of a downward movement or trend reversal. These patterns form when the bears (sellers) take control and push the price lower compared to previous price action. They help traders identify potential entry or exit points.

What is the best bearish candle pattern?

There is no single ‘best’ bearish candle pattern, as the choice depends on factors like timeframe and market conditions. However, the bearish engulfing candle, the three black crows pattern and the dark cloud cover are often considered strong patterns. These are particularly meaningful because they clearly signal a trend reversal and often provide reliable clues of an upcoming downward movement.

What makes a candlestick pattern ‘bearish’?

A candlestick pattern is called ‘bearish’ when it signals a tendency toward falling prices and indicates a downward movement or trend reversal. Typically, bearish patterns consist of red or dark candles that reflect stronger selling pressure. They often appear after an uptrend and show that the bears are increasingly dominating the market while buying interest weakens.

Further topics related to candlestick patterns

Want to know how to gain more control over your investments with effective strategies and benefit from price movements in the crypto market? The Bitpanda Academy offers numerous guides and tutorials providing deeper insights into candlestick patterns, crypto trading and more.

• Bullish candlestick patterns

• Candlesticks