Bearish Advance Block

Bearish Advance Block
Direction: Bearish
Type: Reversal
Reliability: Moderate
Three consecutive blue days, each with a higher close than the previous day
For each new day the body is significantly smaller than the previous days body
The second and third days should also show long upper wicks

After an uptrend, three consecutive blue days close higher everyday. Three blue days in a row typically reflect the very definition of a bullish trend. But with the Advance Line each successive bull candle is weaker than the preceding day. Often the second and third days will have longer upper wicks, indicative the market striving for higher, unsustainable highs; a hallmark of a weakening uptrend. Taken as a whole this scenario suggests that the previous upward rally is losing steam and preparing for a reversal.

Long position holders need to be careful when the bull candle bodies are progressively getting smaller or showing relatively long upper wick. They may want to consider protecting their positions from future price weakening.

The Bearish Advance Block Pattern is not normally a strong reversal pattern, but it can potentially predict a price decline. This patterns signal is stronger when a previous uptrend has pushed prices to new highs. The pattern suggests that buy positions liquidate their positions, though it is not yet clear that an opportunity to short exists. A fourth day reversal (red candle) would act as confirmation for short traders who are looking to enter the market.

In non-FX Markets each new candle will open within the previous candle body and close near the high of the previous day.

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