The Bearish Counterattack Lines Candle Pattern is a candlestick chart pattern which signals a potential reversal in the market. In this article we will show you how to identify it in the right market position with real chart examples.
The Bearish Counterattack Lines Candle Pattern is a two candle pattern which signals a potential reversal in the market. The Pattern is Bearish depending on where it forms.
Bearish Counterattack Lines Candle Pattern should be identified as a signal when occurring in an up-trending market or at the top of a range.
Bearish Counterattack Lines Candle Pattern Criteria:
- Counterattack lines are formed when opposite coloured candlesticks have the same close.
- The Bearish Counterattack Lines Pattern should occur in a downtrend.
- The first candlestick is a long green (bullish) candlestick.
- The second candle is a red (bearish) candle that gaps up on open (the open is above the high of the previous candle) and closes at the same price as the close of the first candle.
- This pattern is similar to the Dark-Cloud Cover Candle Pattern but the close does not intrude into the prior candle’s real body. You can read about that pattern here: Dark Cloud Cover Explained.
- An important element of this counterattack line pattern is if that second session should open robustly higher (gap up). The idea is that on the opening of the second session of this pattern, the market has moved strongly in the direction of the original trend. Then by the close, it moves back to unchanged from the prior session indicating an abrupt halt to the previous bullish momentum.
Quick Reference Guide – Candlestick Basics. If you need a reminder of what candlesticks are have a look at our free PDF – Candlesticks Explained.
The criteria and examples above are just the technical definitions of this pattern. However patterns are only useful with context and with real chart examples.
No pattern will ever exactly match the criteria and in order to be a useful signal must occur in the correct place in a trend. Let’s start by looking at the the classification table for this pattern:
Bearish Counterattack Lines Candle Pattern Classification Table
|Number of Candles In Pattern||2|
|Market Conditions: Range, Down-trend, Up-trend||Up-trend, Ranging|
|Position: Top, Bottom, Range||Top|
What Price Action Does The Bearish Counterattack Lines Candle Pattern Represent?
All candlestick patterns are formed by price action. But the popular ones represent price action that may have significance in signalling the direction of the market.
In this pattern the first candlestick is a strong green bullish candle that forms in an up-trend. The large green candle suggests strong continuing momentum of the up-trend.
When the next session’s opening gaps higher, this initially suggests more bullish momentum. However, the bears then come out fighting and pull prices down to the prior candle’s close.
The bulls’ initial optimism of the second candle’s strong opening probably turned to apprehension by the close when the move failed and price stalled.
This is the classic form of most reversal patterns, strong momentum in one direction that then stalls. As such it can often be a good indicator to exit a trade (in this case exit a long trade).
Before you use a reversal signal as an opportunity to enter the market in the opposite direction it is best to look for some form of confirmation such as the market continuing to move in the new direction with another candle closing below this pattern or with a break of an area of support.
Bearish Counterattack Lines Candle Pattern Example With Confirmation
As with any candle pattern or signal, it is always more significant when there is confirmation from another indicator or via forming at a key level.
In the example below of the US30, the market was in an up-trend which had some momentum before slowing as it approached an area of round level resistance.
The market attempted to break through and was rejected via the formation of the Bearish Counterattack Lines Candle Pattern. The subsequent price action then broke down through the round level on strong bearish action and the trend reversed.
This confirmation can help the trader to feel more confident in the signal and the potential for a good trade.
In What Market Conditions Does The Bearish Counterattack Lines Candle Pattern Become A Signal?
To recap, the Bearish Counterattack Lines Candle Pattern is seen as a bearish reversal pattern when it forms in an existing up-trend or the top of a range.
It is required that the first candle is relatively large and is more valid when the second candle opens on a sharp gap up (the bigger the gap the better).
Let’s look at a couple of real chart examples:
Bearish Counterattack Lines Candle Pattern In A Ranging Market
A ranging market is one where the price action moves up and down between two sets of support and resistance. This is also known as a sideways, balancing or horizontal market. In essence the price action is struggling to break out of the range decisively either on the upside or downside.
As you can see in this example of the US30 the market was in a period of consolidation before pushing to the upside and then quickly falling back down to find support at the same area of consolidation.
The market then started trending back up and looked as if it would break the previous high but instead a Bearish Counterattack Lines Pattern formed. The market then found resistance at that level and started to trend back down.
Bearish Counterattack Lines Candle Pattern In An Up-trending Market
An up-trending market is one where the price action generally moves down over time and is characterized by higher lows and higher highs.
In this US30 example below the market was in a sustained uptrend. A large green candle formed pushing to a new high with good momentum. However, this push quickly stalled with the formation of the Bearish Counterattack Lines Pattern.
This ended the bullis momentum and the market started to trend down and consolidate into a sideways channel.
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Important Information About Candlestick Patterns
Interpretation Of Candle Patterns:
It is important to note that these patterns were originally identified on the daily timeframes of index charts, which is still where they are the most useful. However, this does not mean that they cannot be used for other markets or time frames.
No signal is perfect and should never be used as such. Any patterns that you identify only signals a potential move based on the fact that history repeats itself and forms regular patterns in similar situations.
But past performance is no guarantee of future results! So always treat these patterns with care and think of these guidelines when using them.
Best practice guide for trading of candle patterns:
- No pattern is ever perfect. Be aware that patterns will form slightly differently each time and in different markets.
- Use them as consistently as possible. Even though you will never find patterns exactly the same, you should always implement a consistent ruleset when identifying and using patterns.
- It is never a guarantee, only an indication.
- Make sure you are using it in the right context. For example if it is a continuation pattern then don’t use it to trade reversals!
- Use multiple signals (confirmations) to have more confidence in your trading.
Related Candle Patterns
Bullish Counterattack Lines Candle Pattern
Dark Cloud Candle Pattern
More About Candlestick Patterns
If you are interested in reading more about candlestick patterns you can find our articles on this topic here: https://www.nothardtrading.com/category/candle-patterns/ or choose a pattern below to read more.