Advance block - Deliberation - Concealing Baby Swallow

ADVANCE BLOCK

Advance Block Description

The Advance Block in Figure 2.77 is somewhat indicative as the Three White Soldiers but it is a bearish signal. Unlike the Three White Soldiers, having consistent long candles, the Advance Block shows signs of weakness. The bodies are diminishing as prices rise and the upper shadows becoming longer indicate that the bulls are getting more resistance from the bears. This pattern is going to occur in an uptrend or occurs during a bounce up in a downtrend. It is visually obvious that the rise is losing its power.

Criteria

• Each white candle occurs with higher closes.
• The opens occur in the previous day's body.
• The bodies are getting smaller and/or the upper shadows are getting longer.

Pattern psychology

After an uptrend or a bounce up during a long downtrend, the Advance Block will show itself with an initial strong white candle day. However, unlike the Three White Soldiers, each proceeding day becomes less strong. If the bulls try to take the prices up, the bears step in and take them back down. After three days of waning strength, the bears should confirm the reversal with further deterioration. (See Figure 2.78.)

DELIBERATION

Stalled pattern Description

Another pattern close to the Three White Soldiers pattern is the Deliberation pattern as seen in Figure 2.79. It is formed by two long white bodies. These are followed by a small white candle. This last candle may have opened at or near the previous day's close or it may have gapped up. The Japanese say that this is the time for deliberation. The slow down in the advance is time for the bulls to get out.

Criteria

• The first two white candles are relatively equal long candles.
• The third day is a small body.
• The small body opened at or very near the previous day's close. Or it may have gapped up slightly.

Pattern Psychology

After an uptrend or a bounce up during a long downtrend, the deliberation signal can occur. Like the Advance Block signal, this pattern also represents buyer weakness. In this case, it shows the weakness in one day. This pattern is slightly more difficult to recognize than the Advance Block Pattern. (See Figure 2.80.) 

CONCEALING BABY SWALLOW

Bullish Reversal Pattern CONCEALING BABY SWALLOW Description

The first two days of the signal, two Black Marubozus demonstrate the continuation of the downtrend (see Figure 2.81). The third day, the Reverse Hammer illustrates that the downtrend is losing steam. Notice that it gapped down on the open, then traded up into the previous days trading range. This demonstrated buying strength. The last day opens higher and closes below the previous days close. It completely engulfs the whole trading range of the prior day. Although the trading ended at the trends low point, the magnitude of the downtrend had deteriorated significantly. Expect buying to show itself at these levels. This is a very rare signal.

Criteria

• Two large Black Marubozus make up the beginning of this pattern.
• The third day is a Reverse Hammer formation. It gaps down from the previous day's close.
• The final day completely engulfs the third day, including the shadow. Pattern Psychology.

Pattern psychology

The bears have been in control for awhile. At the end of a downtrend, two Black Marubozu days appear. The third day gaps down at its low, and then trades up into the trading range of the previous day. This buying is then negated by the sellers stepping back in. However, the bears have taken notice of the buying that occurred. The final day opens higher, again causing much concern for the sellers. As it sells off for the rest of the day, the concerned shorts have time to cover their positions. The new closing low is not of the same magnitude of the previous down days of the trend. The buyers do not run into very much selling resistance from here. There is no chart to illustrate this pattern.