A counterattack candlestick pattern is an indicator of trend reversals.
Experienced traders use this unique technical indicator for positional trades.
This article sheds light on this important financial indicator.
What is a Counterattack Candlestick Pattern?
A counterattack candlestick pattern is a tool to identify trend reversals. A counterattack pattern emerges either during an upward or downward trend. In candlestick technical charts, counterattack lines consist of a two-candle reversal pattern. Two candlesticks move in opposite directions. This pattern can either be bullish or bearish.
It occurs when the market is experiencing a downturn.
It signals a likely reversal of the market's downward trend to an upward one.
During a trend reversal, sellers seem to lose control over the downward trend of the market or stock.
Bearish counterattack pattern:
It occurs when a stock or an index is on an upswing.
It signals the reversal of a likely upward trend in the market to a downward one.
During a trend reversal, buyers seem to lose control over the downward trend in the market or stock.
How Do I Identify a Bullish Counterattack Candlestick Pattern?
You can identify a bullish counterattack pattern by observing the following points:
In a downward-trending market, the first colored candle will be black and have a long, real body.
The second candle will also have a long, real body. However, its size will be similar to that of the first candle. In the open, the second candle will gap down. However, near the close of the first black candle, the second one will gap down.
When the initial trend becomes unsustainable, the market or stock price reverses its direction from the downtrend to the uptrend.
How Do I Identify a Bearish Counterattack Candlestick Pattern?
You can identify a bearish counterattack pattern by observing the following points:
In an upward-trending market, the first candle will be white and have a long, real body.
The second candle will have a long, real body. Its color will be black, and its size will be similar to that of the first candle.
In the open, the second candle gaps higher. However, the close of the second candle will be near the close of the first candle.
When the initial trend becomes unsustainable, the market or stock price reverses from an uptrend to a downtrend.
A counterattack candlestick pattern occurs rarely.
Experts advise that a trader must always wait for the confirmation of a candle before trading based on the counterattack candlestick pattern's occurrence.
In fact, before making a trading decision, you must always cross-check it with other technical indicators.
This helps minimize your trading losses in the event of an unexpected turn.