BEARISH DELIBERATION BLOCK
Definition
This pattern consists of three consecutive white candlesticks with consecutively higher closes in an uptrend.
Recognition Criteria
1. The market is currently defined by a dominant upward trend.
2. A white candlestick appears on the first day.
3. The next day is another white candlestick, which opens within the range of the previous day’s body and closes above the previous day’s close.
4. On the final day, a short white candlestick, a spinning top, or a Doji appears, gapping up above the second day's candlestick.
Pattern Requirements and Flexibility
The first two white candlesticks in the Bearish Deliberation Block should not be short. On the second day, the market should open at or below the first day's closing price, while the closing price on the second day should be at or above the first day's close. The final candlestick, which gaps up, can be either a short white candlestick or a Doji.
Trader’s Behavior
The two consecutive white candlesticks affirm the uptrend, and the bulls are pleased with the situation. This secure uptrend attracts more buyers, leading to the third day opening above the preceding day's close. The third day also results in a white candlestick, further boosting the bulls’ confidence in the continuation of the uptrend. However, a closer examination reveals signs of weakness. The range of each candlestick's body is progressively shrinking, and the third day gaps up, forming a star that indicates indecision.
Sell/Stop-Loss Levels
The confirmation level is defined as the midpoint between the last close and the body top of the second day. 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.