The iShares MSCI USA Value Factor ETF just printed a clean bearish engulfing pattern after rallying 19% from its December lows. The question isn't whether this qualifies — it does. The question is whether the context supports a reversal.
What We're Looking At
Thursday's session was quiet: opened at $148.32, closed at $148.47. A $0.15 green body. Buyers holding ground but without conviction.
Friday opened higher at $148.61, pushed to $149.21, then reversed hard — closing at $147.18. That's a $1.43 red body that completely engulfs Thursday's candle.
The Quality Check
This one passes every test.
Body ratio: The red candle's body ($1.43) is 9.5x larger than the green candle's body ($0.15). That's not just engulfing — that's overwhelming.
The geometry is textbook: Friday opened above Thursday's close ($148.61 > $148.47) and closed below Thursday's open ($147.18 < $148.32). The red body fully wraps the green.
Volume confirms conviction: 1.21 million shares on Friday versus lighter volume Thursday — sellers showed up with force.
As Nison puts it: "A bearish engulfing pattern occurs when selling pressure overwhelms buying force as reflected by a long black [red] real body engulfing a small white [green] real body."
That's exactly what happened here.
Why This Setup Gets Attention
Context amplifies everything. VLUE rallied 19% over two months, climbing from $124 in early December to test $149. The ETF sits 6.3% above its 50-day moving average at $138.40 — extended territory.
The Stochastic oscillator reads 85/81, firmly overbought. RSI reached the high 60s during the rally. This isn't a stock drifting sideways — it's an ETF that ran hard into resistance and printed a reversal candle with volume.
Patterns gain significance at extremes. This one appeared exactly where you'd expect a reversal: overbought, overextended, and now showing sellers taking control.
What to Watch
Bearish confirmation: A close below $146.38 (Friday's low) validates that sellers remain in control.
Invalidation: A close above $149.21 negates the pattern and suggests bulls aren't finished.
The Lesson
Body ratio matters. A 9.5x engulfing ratio leaves no ambiguity — sellers overwhelmed buyers in a single session. When you see a tiny green candle followed by a red candle nearly 10x its size at overbought extremes, that's not noise. That's a statement.
The Candlestick Hit teaches pattern recognition through real-time market examples. This is educational content, not trading advice.