BEARISH ADVANCE BLOCK
Definition
This pattern consists of three consecutive white candlesticks with consecutively higher closes in an uptrend.
Recognition Criteria
1. The market is currently characterized by a strong upward trend.
2. A white candlestick is observed on the first day.
3. The next two days are white candlesticks with each closing above the previous day’s close and having an opening within the range of the previous day’s body.
4. The last two days have long higher shadows.
Pattern Requirements and Flexibility
The first candlestick of a Bearish Advance Block should be a normal or long white candlestick. The following consecutive white candlesticks must open within the range of the previous day's body and close above the previous day's close. The bodies of the three white candlesticks should progressively shorten, while the upper shadows lengthen.
Trader’s Behavior
A strong white candlestick is followed by another white candlestick that closes above the previous close. As two consecutive white candlesticks appear, the uptrend seems secure, making the bulls content. This secure uptrend attracts more bulls, leading to a third white candlestick that also closes above the previous day's close. Although three consecutive white candlesticks suggest bulls dominate the market, there are signs of weakness. Firstly, the bodies of the candlesticks get progressively shorter, indicating increasing indecision. Secondly, each day opens within the range of the previous day's body. Thirdly, the upper shadows are lengthening. Despite the second and third days closing higher, the distance between the closes is narrowing. This signals that the uptrend is losing momentum, and buyers should exercise caution.
Sell/Stop-Loss Levels
The confirmation level is defined as the midpoint of the last white body. For confirmation, prices should fall below this level.
The stop-loss level is defined as the higher of the last two highs. Following the bearish signal, if prices rise instead of falling and either close above or make two consecutive daily highs above the stop-loss level, without detecting any bullish pattern, the stop-loss is triggered.