Bass envelope – What is it, definition and concept

Like the bearish engulfing, this is a technical analysis indicator. It warns us that the market is going to change its trend. Specifically, that prices will stop rising and begin to fall. In this way, we can make the investment decision.

We are before a figure of Japanese candlesticks in which one of them, large and dark, completely envelops another located to its left. It indicates that prices will stop rising. Thus, it would be the inverse case of the bullish engulfing and is more reliable than the bearish belt hold.

Bearish Envelope 1

The volume in the bearish envelope

The volume, understood as the amount of trading in financial assets over a period of time, is a very relevant indicator. In fact, it can help bolster technical analysis predictions.

In this case the market would go up. But if the volume drops, there may be a change in trend. Therefore, this analysis reinforces the bearish engulfing pattern.

Characteristics of the bearish envelope

We are going to show below some of its characteristics that are more relevant.

  • The previous trend has to be up. This feature is the most significant.
  • The candle to its left is bullish. Therefore, the close must be above the open.
  • It is not necessary to cover the above range completely. In fact, it is enough for it to engulf the real body of the previous candle without the tails or shadows.
  • In the bearish engulfing the close will be below the open corresponding to the previous day and the open, in turn, will be lower than the close of the candle to its left.

Support and resistance

These two concepts have a meaning that is related to the price band. Resistance is like a maximum price, from which it starts to go down and support would be like the minimum price from which it goes up.

We must take into account the shadows of the bearish engulfing candle and the previous one. In this way, the support would be at the lowest point of the two tails. From here, the buying force would be greater than the selling force and the price, as demand increased, would begin to rise.

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