AT&T (T) Flashes a Bearish Engulfing Pattern: A Potential Storm Brewing

A Bearish Engulfing pattern is one of the market’s clearest warning signs: a larger red candle fully consumes the previous green candle, hinting at a possible reversal from bullish to bearish momentum.

As Steve Nison, the father of modern candlestick analysis, puts it: “This is where sellers show they’ve regained control, swallowing up prior enthusiasm in one decisive move.”

Now let’s zoom into AT&T’s daily chart (NYSE: T). On July 9, the stock printed a textbook Bearish Engulfing pattern (highlighted in the yellow box). After a modest bounce from late June lows, buyers pushed the price higher on July 8. But the very next day, sellers arrived with force: the candle opened above the prior close and then plunged, closing well below the previous day’s open.

AT&T, a telecom giant with over 100 million wireless customers and a storied dividend history, is no stranger to volatility. But this engulfing move comes just as the stock was trying to reclaim the $29 level, adding weight to the pattern’s significance.

Reading the Pattern in Context
The Bearish Engulfing here signals a potential shift in sentiment. Traders who had piled in on hopes of a rebound may now be second-guessing their positions. Psychology-wise, it’s the equivalent of bulls charging forward, only to be blindsided by a wave of heavy selling.

Trading a Bearish Engulfing
Candlestick traders often use this pattern as an early warning of downside risk. As Nison warns: “The engulfing pattern works best after an uptrend, especially when volume expands on the engulfing day.” Entry tactics include waiting for a breakdown below the engulfing day’s low as confirmation. Stop-losses are typically placed above the high of the engulfing candle. Profit targets may vary depending on risk tolerance, but many traders will watch for a test of nearby support levels.

What to Watch Next
Keep an eye on the $28 and $27.50 zones. A firm break below these levels could confirm further weakness, while a quick recovery above $28.50 could challenge the bearish outlook.

Key Takeaways:

• A Bearish Engulfing pattern appeared on AT&T’s daily chart on July 9.

• It signals a possible reversal after a short-term bounce.

• Traders should DYOR and watch for confirmation before making decisions.

The content on this site is for educational purposes only and isn’t meant to be financial advice. We’re here to teach you about Candlestick analysis, but any decisions you make are your own. Always do your own research or talk to a professional before making financial moves.