BULLISH DELIBERATION BLOCK
Definition
This pattern features three consecutive black candlesticks, each closing lower than the previous one in a downtrend. It is the counterpart of the Bearish Deliberation Block Pattern.
Recognition Criteria
1. The market is currently defined by a dominant downward trend.
2. A black candlestick appears on the first day.
3. The next day is another black candlestick, which opens in the range of the previous day’s body and closes below the previous day’s close.
4. The final day features a short black candlestick, a spinning top or a Doji that gaps down below the second day’s close.
Pattern Requirements and Flexibility
The first two black candlesticks in the Bullish Deliberation Block should not be short. The second day should open at or above the first day’s close, while the second day’s close should be at or below the first day’s close. The third candlestick, which gaps down, can be a short black candlestick or a Doji.
Trader’s Behavior
The two consecutive black candlesticks confirm the downtrend, and the bears are content. The secure downtrend attracts more bears, leading to the third day’s open below the preceding day’s close. The third day is also a black candlestick, reinforcing the bearish sentiment. However, closer examination reveals signs of weakness. The range of each candlestick body is progressively narrowing, and the third day gaps down, forming a star that indicates indecision.
Buy/Stop-Loss Levels
The confirmation level is determined as the midpoint between the last close and the bottom of the second day’s body. Prices need to rise above this level for confirmation.
The stop-loss level is set at the lower of the last two lows. After a BUY signal, the stop-loss is triggered if prices decline instead of rising and either close below the stop-loss level or record two consecutive daily lows below it, without any bearish pattern being detected.