KEY
TAKEAWAYS
- The capturing star sample signifies a short-term rotation from accumulation to distribution.
- The bearish engulfing sample suggests sellers have taken management, suggesting additional weak spot.
- The night star sample is a three-candle formation that illustrates an exhaustion of shopping for energy.
There isn’t any denying that the broad markets stay in a resilient uptrend off the April 2025 low. But when there’s one factor I’ve realized from a few years of analyzing charts, it is to stay vigilant throughout bullish phases. Despite the fact that I am going to assume the uptrend continues to be intact, that does not imply I can cease in search of indicators of potential weak spot!
With that in thoughts, listed here are three bearish candle patterns that always pop up throughout bullish market phases. By in search of these patterns within the shares and ETFs that you simply personal, you possibly can hopefully get forward of any corrective strikes and take income earlier than it is too late!
The Taking pictures Star Sample
In the event you see an extended higher shadow, little to no decrease shadow, and the open and shut are shut collectively close to the underside of the day’s vary, then you might have recognized a capturing star candle sample. In the event you’re aware of the hammer candle sample, then you possibly can consider this as a hammer candle however mainly every part is the wrong way up!
The chart of AT&T (T) has featured quite a lot of capturing star candles to date in 2025. Simply earlier than the selloff in early April, there was a transparent capturing star candle after the March rally. Then in the course of the rally off the April low, a capturing star sample in early Might recommended that the uptrend part was nearing an exhaustion level.
The Bearish Engulfing Sample
One of the vital recognizable patterns within the candlestick library, the bearish engulfing sample represents a short-term rotation from accumulation to distribution. Mainly, a big up candle is adopted by a big down candle, and the second day’s “actual physique” (the open-to-close vary) engulfs the vary of the primary day’s actual physique. Â
Take a look at the power within the uptrend for Paramount World (PARA) going into early June. Then simply earlier than the 4th of July weekend, a bearish engulfing sample suggests a change of character because the bears take management. It is price noting that these candle patterns will not be long-term indicators, however moderately point out short-term dynamics. So a bearish engulfing sample suggests weak spot for the subsequent one to a few bars.
The Night Star Sample
In the event you took the bearish engulfing sample, after which added one other small candle in the midst of these two days, then you definately’d have an night star sample. Now most candlestick textbooks will inform you that the “star” day within the center ought to embody a niche, so there isn’t any overlap between that day’s vary and the opposite two candles. In observe, I’ve discovered most individuals ignore this element and moderately search for patterns with sufficient similarities to this fundamental construction.
Going again to the AT&T chart we used earlier, we will see a night star sample on the finish of June. A giant day is adopted quickly after by a giant down day, with a small candle within the center. It is a nice instance of the place extra weak spot led the worth under the 50-day shifting common, serving to substantiate the bearish outlook as represented by the night star sample.
It is really easy to turn into complacent throughout an prolonged bull market rally. Buyers that repeatedly scan for bearish candle patterns have an edge, as they will anticipate potential turning factors earlier than the uptrend adjustments in dramatic vogue to a brand new downtrend part!
RR#6,
Dave
PS- Able to improve your funding course of? Try my free behavioral investing course!
David Keller, CMT
President and Chief Strategist
Sierra Alpha Analysis LLC
https://www.youtube.com/c/MarketMisbehavior
Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and techniques ought to by no means be used with out first assessing your individual private and monetary state of affairs, or with out consulting a monetary skilled. Â
The writer doesn’t have a place in talked about securities on the time of publication.  Any opinions expressed herein are solely these of the writer and don’t in any method symbolize the views or opinions of some other particular person or entity.
David Keller, CMT is President and Chief Strategist at Sierra Alpha Analysis LLC, the place he helps energetic buyers make higher choices utilizing behavioral finance and technical evaluation. Dave is a CNBC Contributor, and he recaps market exercise and interviews main specialists on his “Market Misbehavior” YouTube channel. A former President of the CMT Affiliation, Dave can also be a member of the Technical Securities Analysts Affiliation San Francisco and the Worldwide Federation of Technical Analysts. He was previously a Managing Director of Analysis at Constancy Investments, the place he managed the famend Constancy Chart Room, and Chief Market Strategist at StockCharts, persevering with the work of legendary technical analyst John Murphy.
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