Bullish Breakaway Candlestick
– Direction: Bullish
– Type: Reversal
– Reliability: Moderate
– The first day is a long red day continuing an established down trend.
– The second, third and forth days all continue in the same direction with lower closes, but more weakly than the first bearish push.
– The fifth day is a long blue day that closes into the body of the first or second days.
The first few candles suggest the strength of the trend has accelerated significantly. By the third and forth days, weaker moves down suggest the move has Started to slow.
In fact the first three to four days matches the bullish Three Stars in the South formation. The Three Stars in the South Pattern is not normally a strong reversal pattern and traders usually wait for additional confirmation the next day.
The last candle of the Bullish Breakaway offers exactly that confirmation. After the few days of deteriorating bearish trend, a clear bullish candle emerges to reorient the market direction. Markets typically want to see the bullish candle that moves at least above the previous two or three day body for ideal confirmation.
Number of Middle Candles
Ideally we see four red candles before the large bullish move, but realistically there could be two, three or even five candles that communicate the same information of weakening bearish trend. Thus traders look for four candles when identifying this formation, but similar formations will be accepted.
Candlestick analysts in non-FX markets typically require Breakaways to have gaps after the first big bearish move on day-one. Variations in gaps suggest changing strength of Breakaways. Due to the nature of the more efficient 24 hour currency market, traders will not see such gaps.
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