BULLISH BREAKAWAY
Definition
This five-candlestick pattern begins with a strong black candlestick. The following three days, after a downside gap, see consecutively lower prices. However, on the last day, the limited losses of the previous days are completely erased, and it closes within the gap between the first and second days. This indicates a potential short-term reversal.
Recognition Criteria
1. The color of the first strong black day represents the current downtrend.
2. The second day is also a black candlestick with a body gap in the direction of the trend.
3. The third and fourth days continue the trend, ideally with the third day being white, but it can also be black like the fourth day.
4. The fifth day features a white candlestick that closes within the gap formed between the first two days..
Pattern Requirements and Flexibility
The first black candlestick of the Bullish Breakaway pattern should not be short. However, the three subsequent black candlesticks after the gap can be short, with the possibility of the third candlestick in the middle being white. The final white candlestick should close within the gap but should not fully close the gap.
Trader’s Behavior
The downtrend has accelerated with a significant gap but then begins to lose momentum, still continuing in the same direction. The slow deterioration of the downtrend becomes evident. Finally, an upward burst completely reverses the price action of the previous three days. The implication of a reversal is indicated by the fact that the gap has not been filled. A short-term reversal has occurred, but confirmation may still be necessary.
Buy/Stop-Loss Levels
The confirmation level is set at the last closing price. For confirmation, prices need to surpass this level.
The stop-loss level is set at the last low. 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.