This is a bearish reversal consisting of a single black candle with an open bozu and a very small tail. A black marubozu can also be a variant for the candlestick, though marubozu or with a tail this is typically considered a low level pattern. A bearish ‘Belt Hold’ can sometimes be mistaken for the more significant ‘Dark Cloud Cover’. In the book Japanese Candlestick Charting Techniques, Steve Nison classifies ‘Bearish Engulfing’ patterns as a ‘Belt Hold’ as long as the requisite open bozu is present.
Technical Description
1) The preceding trend must be bullish.
2) The latest candlestick opens with a full upside gap that turns out to be the high for the period.
3) From the open-high price action for the period turns bearish closing near its lows with a very small tail, possibly none.
Mark’s Perspective
The bigger the body of the pattern the greater the probability of a bear market developing though ‘Belt Hold’ patterns more often leads to a correction than a full reversal. When trading sell only if the latest candlestick opened with a gap down, or is a black candle with a lower close. Stops must be placed above the pattern’s high.