This is the last part of Candlestick Patterns’ Technical Analysis: 10 Medium Strength Bearish Reversal Signals article series which discuss about Candlestick Patterns that act as stocks analysis signal with medium reliability to tell whether the stocks market reverses from up trend (bullish) to down trend (bearish) or not. This kind of signals are very important since can tell us the best time to sell our stocks/shares – either to realize our profit or to cut our loss minimum.
Please be noted that these signals have medium reliability so need to wait the technical analysis confirmation before decide to sell our stocks/shares on stocks market. So far, we have discussed nine of candlestick patterns with medium reliability which are Bearish Dragonfly Doji, Bearish Long Legged Doji, Bearish Engulfing, Bearish Gravestone Doji, Bearish Harami Cross, Bearish Meeting Lines, Bearish Advance Block, Bearish Three Star, and Bearish Two Crows. This time, let’s discuss another one of Candlestick Bearish Reversal Signal, the Bearish Breakdown Candlestick Patterns.
Technical Analysis of Bearish Breakdown Candlestick Patterns
Bearish Breakdown is the five candlestick patterns which needed five candlesticks to form the chart pattern. Bearish Breakdown Candlestick Patterns consists of a long solid white candlestick which followed by three short candlestick (with increasing price) and then closed by a solid black candlestick. For better understanding, let’s take a look at the picture below:
As we can see, there are five candlesticks that forms this Bearish Breakdown Candlestick Patterns. Please be noted that this chart pattern must be happened after a long/significant up trend (bullish).This candlestick patterns can be happened in many trading ranges but for simplicity, let’s assume it is happened in daily basis. In the first day, there is a long solid white candlestick which tells us that the buyers still rule the stocks market powerfully and considered in the continuous up trend (bullish).
In the second, third, and fourth day there are three short candlesticks – the second and fourth day candlestick are the white candlestick while the third day candlestick is the “don’t care” candlestick – with higher price pattern. These second, third, and fourth candlesticks tell us that the buyers still try to push the stocks market price but without enough power. In other word, the buyers power has decreased after a long/significant up trend (bullish).
And then, in the fifth day, there is a solid black candlestick which tells us the buyers do not have the power anymore while sellers have the full power to push the stocks market price. Obviously, we have the bearish/sell signal in here but the power is not strong enough so we need to wait for the technical analysis confirmations before decide to sell our stocks/shares on stocks market. The confirmations can be from the candlestick itself or from other Technical Analysis (TA) Indicators such as Volume, Stochastic, MACD, etc.
Since this article is about candlestick, let’s use the candlestick based confirmation this time — yup, the candlestick based confirmation as like picture below:
I have added a solid black candlestick and a technical analysis confirmation line in picture above. As we can see, the stocks market is confirmed in down trend (bearish) if in the next trading range, there is a solid black candlestick with lower closing price than the first day opening price. Please be notified that this confirmation black candlestick mustn’t be happened right in the next day but can be happened in the next several days.
This technical analysis confirmation tells us that the sellers power is very strong and there is high possibility that the stocks market is pushed down in the next trading range. So, in here, the technical analysis of Bearish Breakdown Candlestick Patterns tells us that it is the time to sell our stocks in stocks market. It is a clear message from a simple stocks analysis, right?
Have a profitable stocks trading everyone!