The counterattack candlestick pattern is characterized by two candles. It can occur in both rising and falling markets, and is identified by a long black candle, followed by a second candle that gaps down or up but then closes higher or lower, near the close of the first candle, indicating a bullish/bearish reversal during a trend.
What is the counterattack candlestick pattern?
The counterattack candlestick pattern is a signal of an upcoming reversal in the market trend, with two variations: bullish and bearish.
Counterattack Candlestick Pattern Strategy
Bullish Counterattack Candlestick Pattern
- There must be a clear downtrend in the market.
- The first candle must be a long, black candle with a real body.
- The second candle must be a long (preferably of equal length to the first candle) white candle with a real body and it must close near the close of the first candle.
Bearish Counterattack Candlestick Pattern
- You should spot a clear uptrend in the forex market.
- The first candle must be a long, white candle with a real body.
- The second candle must be a long black candle with a real body and it must close near the close of the first candle.
What information does the bearish pattern convey to traders?
The bearish counterattack candlestick pattern indicates a potential reversal of the current upward trend. The first bullish candle shows that the upward trend is still in place, and the second candle’s close above the open confirms this trend. The second candle also creates an upward gap from the close of the first candle, which shows the control of the bulls. However, the opening of the second candle causes a decrease in demand and allows the bears to push prices down further, indicating that the uptrend will reverse to a downward trend after the formation of the bearish counterattack pattern. The confirmation of the trend reversal can be seen in the third or fourth candle.
Counterattack Candlestick Pattern Pros & Cons
Pros
- Can indicate a potential reversal in the current trend.
- Can signal a strong buying/selling opportunity.
- Can indicate a shift in momentum.
Cons
- Can be difficult to identify and interpret.
- Can be subject to false signals.
- May not always be reliable in predicting future forex price movements.
Conclusion
The counterattack candlestick pattern can help traders spot possible market trend changes. It comes in two forms, bullish and bearish, and has specific requirements. Keep in mind that this pattern can give false signals and it’s advisable to use it along with other technical analysis techniques for better trading decisions.
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