Understanding the Bearish Engulfing Pattern on Daily Charts
Hey everyone, fairly new to actively trading commodities and trying to get a handle on chart patterns beyond just basic support/resistance. I was looking at $SI Silver's daily chart today, which traded between 18.65 and 19.63 and is currently down around 1.48% at 19.34. It's fascinating to me how the prior day's price action can be completely overshadowed. What I'm trying to wrap my head around is the bearish engulfing pattern. From what I understand, it's essentially when a large red (or black) candlestick completely 'engulfs' the previous day's smaller green (or white) candlestick, meaning the high and low of the bearish candle completely cover the high and low of the bullish one. It's supposed to signal a strong shift in momentum to the downside. I've seen it mentioned a lot as a significant reversal signal. Is the strength of the signal really dependent on the size of the engulfing candle, or more about where it appears after a trend? For instance, if $SI had a small up day yesterday and today's move down to 19.34 was a clear engulfing candle, how much weight would you put on that as a short-term reversal versus if it happened after a prolonged rally?