Opendoor's stock flashes 'bearish engulfing' chart pattern. Is the rally over?

By Tomi Kilgore

The rally to new highs, followed by a sharp intraday reversal to close lower, could have some chart watchers believing a top has been hit

A "bearish engulfing" pattern popped up in Opendoor's stock chart - potentially a warning of a trend reversal.

Shares of Opendoor Technologies Inc. were surging toward another record close Tuesday - before suddenly pulling a U-turn on no news to close sharply lower.

That is exactly the sort of trading behavior that some on Wall Street would say marks a short-term top for a stock.

The behavior created a classic pattern in Opendoor's (OPEN) stock chart known as a "bearish engulfing," which would suggest to many technicians that a stock's bullish trend has reversed course.

Bearish engulfings take the form of a two-day pattern. In Opendoor's case, first came Friday's gap higher, which saw shares open at $6.41 - above the previous session's closing price of $5.96 - to show how aggressive bulls were being. Shares of the e-commerce platform for residential property deals then rose even further to a second straight record close at $6.65, as bulls remained full in control.

Then on Monday, there was another gap up at the open at $7.00 a share, before the "cult stock" climbed further to a three-year intraday high of $7.32, despite no fresh news being announced. At that intraday high, the shares had soared 82.1% amid a seven-day winning streak. (As of Monday's close, they have skyrocketed 788.5% over the past three months.) Again, all signs pointed to bulls being fully in control.

Yet apparently, the bottom fell out within a half hour of the opening bell, again on no news. The stock closed Monday down 9.2% at $6.04, or below where it had opened on Friday. In technical terms, bears engulfed the bulls.

Read: 7 key candlestick reversal patterns.

The reason that pattern warns of a top is that it depicts a behavior in which bears took the bulls' best shot, then launched a surprise successful counterattack. The idea is that if bulls actually had the control they thought they had, they wouldn't have turned tail so easily, especially with no fundamental news to scare them off.

On the bright side for bulls, the pattern appeared in a daily chart - so if it does create a top, it could be only for the short term. Of course, like it has for shares of Strategy Inc. (MSTR) - the software company and bitcoin play formerly known as MicroStrategy - that short-term effect could develop into something a little longer term.

Also read: What the big 'key reversal' pattern is MicroStrategy's stock chart could mean.

"Key reversal" patterns are very similar to "bearish engulfings."

But as with any market-timing mechanism, it's always good to check to see how a specific pattern may have worked for a stock in the past. Since each stock has its own behavioral tendencies, it's possible that a certain pattern could work well for one stock but not for another.

The last time a bearish engulfing appeared in Opendoor shares at a significant high was on Nov. 2, 2021, the day after they closed at an eight-month high of $24.75. The stock still hasn't come anywhere near that level.

To be sure, as chart watchers will always note, past stock behaviors don't always repeat.

So the bearish engulfing in Opendoor's stock chart doesn't necessarily mean the recent rocket ride is over - but it does warn bulls that, at the very least, a yellow light has flashed.

And keep in mind that, like with Strategy shares, there's a good chance the stock bounces slightly in the very short term after Monday's big selloff. But as long as Friday's closing price isn't surpassed, the bearish view of the pattern remains. Some might even say the stock would have to make a new intraday high to wipe out the bearish influence of the pattern.

Either way, those looking to buy on the dip should beware, and be prepared - see Strategy's stock chart - for more quick intraday reversals.

-Tomi Kilgore

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09-08-25 1831ET