BULLISH DELIBERATION BLOCK
Definition
This pattern consists of three consecutive black candlesticks with consecutively lower closes in a downtrend. It is the compliment of the Bearish Deliberation Block Pattern.
Recognition Criteria
1. Market is characterized by a prevailing downtrend.
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 is a short black candlestick, a spinning top or a Doji that gaps down below the second day.
Pattern Requirements and Flexibility
The first two black candlesticks appearing in the Bullish Deliberation Block should not be short. The second day should open at or higher than the close of the first day, while the close of the second day should be at or below the close of the first day. The gapping down third candlestick can be a short black candlestick or a Doji.
Trader’s Behavior
The two consecutive black candlesticks secure the downtrend, and the bears are content with the situation. The secure downtrend attracts more bears, and the third day opens below the close of the preceding day. The third day is also a black day, convincing the bears about the continuation of the downtrend. A closer look, however, reveals signs of weakness. The range of each body is getting smaller day-by-day and the third day gaps below making a star, which shows indecision.
Buy/Stop Loss Levels
The confirmation level is defined as the midpoint between the last close and the body bottom of the second day. Prices should cross above this level for confirmation.
The stop loss level is defined as the lower of the last two lows. Following the BUY, if prices go down instead of going up, and close or make two consecutive daily lows below the stop loss level, while no bearish pattern is detected, then the stop loss is triggered.