Bullish Counterattack Lines Candle Pattern Explained

Bullish Counterattack Lines Candle Pattern Explained
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The Bullish 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 Bullish Counterattack Lines Candle Pattern is a two candle pattern which signals a reversal in the market. The Pattern can be Bullish depending on where it forms.

Bullish Counterattack Lines Candle Pattern should be identified as a signal when occurring in a down-trending market or at the bottom of a range.

Bullish Counterattack Lines Candle Pattern Criteria:

  • Counterattack lines are formed when opposite coloured candlesticks have the same close.
  • The Bullish Counterattack Lines Pattern should occur in an uptrend.
  • The first candlestick is a long red (bearish) candlestick.
  • The second candle is a green (bullish) candle that gaps down on open (the open is below the low of the previous candle) and closes at the same price as the close of the first candle.

Additional notes:

  • It is similar to the Piercing Candle Pattern which is also a bullish reversal pattern. The difference is that the counterattack line does not usually move into the prior session’s real body, it just gets back to the prior session’s close. Read about the Piercing Pattern HERE.
  • It is also similar to the bearish in-neck pattern, but the difference is that the green bullish counterattack line is a longer candlestick than the green candlestick of the in-neck line. With the counterattack line, the market opens sharply lower and then springs back to the previous close, while the in-neck line opens slightly lower then moves back to the prior close.
  • An important element of this counterattack line pattern is if that second session should open robustly lower (gap down). 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 bearish 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:

Bullish Counterattack Lines Candle Pattern Classification Table

Number of Candles In Pattern 2
Type: (Reversal/Continuation) Reversal
Bullish/Bearish/Indecision Bullish
Market Conditions: Range, Down-trend, Up-trend Down-trend, Ranging
Position: Top, Bottom, Range Bottom

What Price Action Does The Bullish 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 red bearish candle that forms in a down-trend. The large red candle suggests strong continuing momentum of the down-trend.

When the next session’s opening gaps lower, this initially suggests more bearish momentum. However, the bulls then come out fighting and pull prices up to the prior candle’s close.

The bears’ 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 short 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.

Bullish 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.

Hint: It is always good practice to look for confirmation for any signal that you are looking to trade.

In the example below of the US30, the market had been in a side channel before making a fairly strong move into a downtrend.

As the market neared an area of round level resistance it made a strong move down through the level. However the move was quickly stalled with the formation of a Bullish Counterattack Lines Pattern.

The market then moved up and found continued support at the round level before starting to trend back up.

This confirmation can help the trader to feel more confident in the signal and the potential for a good trade.

Bullish Counterattack Lines Candle Pattern With Confirmation Example

Note: you can get a free round level indicator for MT4 from us here: Round Levels MT4 Indicator.

In What Market Conditions Does The Bullish Counterattack Lines Candle Pattern Become A Signal?

To recap, the Bullish Counterattack Lines Candle Pattern is seen as a bullish reversal pattern when it forms in an existing down-trend or the bottom 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:

Bullish 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.

Ranging Market Example
Ranging Market Example

As you can see in this example of the US30, the market was ranging downwards and formed a Bullish Counterattack Lines Candle Pattern at the previous level of support.

This was a good indication that that level of support would hold and it helped to form the bottom of the range before price action started moving back up.

Bullish Counterattack Lines Candle Pattern In A Ranging Market Example

Bullish Counterattack Lines Candle Pattern In A Down-Trending Market

A down-trending market is one where the price action generally moves down over time and is characterized by lower lows and lower highs.

Down-trending Market Example
Down-trending Market Example

As you can see in this US30 example, the market was down-trending. The market then formed a Bullish Counterattack Lines Candle Pattern showing a slowing of the bearish move after which the market reversed.

Bullish Counterattack Lines Candle Pattern In A Down-trending Market Example
Bullish Counterattack Lines Candle Pattern In A Down-trending Market Example

Candle Pattern MT4 Indicator Downloads

If you trade using MT4 then why not try out our free MT4 indicators? Most of our indicators, including the most common candle pattern indicators are Free and available for download here: MT4 Indicator Page.

Most of our candle indicators also have an alternate version which can show the signal in a separate indicator window of the chart if that is your preference.
For advanced users you can use our Pin Bar Pattern Manager (Paid) to specify your own parameters of candles you want to identify. You can find that here.

Important Information About Candlestick Patterns

Attribution:

All of the candlestick patterns that we explain on NothardTrading.com must be attributed to Steve Nison and his books on candle charting, the most famous of which was Japanese Candlestick Charting Techniques (Amazon). You can also find out more at his website here.

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

In Neck Candle Pattern

To learn more about In Neck Candle Pattern, see our article here: In Neck Candle Pattern Explained

Piercing Candle Pattern

To learn more about Piercing Candle Pattern, see our article here: Piercing Candle Pattern Explained.

Bearish Counterattack Lines Candle Pattern

To learn more about Bearish Counterattack Lines Candle Pattern, see our article here: Bearish Counterattack Lines Candle Pattern Explained.

Justina Nothard

Justina Nothard

Hi, I’m Justina Nothard, a retail investor trading Stock Indexes and Forex Markets.

I understand how hard it can be for the ordinary trader to learn the basics and find useful tools and practical information.

This is why I decided to create Nothard Trading to help you take control of your trading.

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