When it comes around to technical analysis and candlestick patterns, there’s hardly any dearth of reversal indicators, and one such trend reversal indicator that many traders use to take their positional trades is the counterattack candlestick pattern, and below is everything that one needs to know about this unique technical indicator.
- Counterattack candlestick pattern – an overview
It is also known as the counterattack lines candlestick pattern. This indicator involves two candlesticks that move in opposite directions, and it is useful for identifying trend reversals. It can either occur during an uptrend or a downtrend, but when it occurs during a downtrend, the indicator is known as a bullish counterattack pattern, and when it occurs during an uptrend, the indicator is to be termed as a bearish counterattack pattern.
- How to use the counterattack candlestick pattern?
Spotting the pattern is one thing, but entering into a trade using the identified pattern has been a whole other ball game, and therefore, here are some of the key pointers that one should keep in mind before entering into a trade based on the counterattack lines candlestick pattern.
- Firstly one should look out for a hard trend, while it can either be a bullish trend or a bearish trend.
- Once one has identified the trend, look out for a candle that either opens with a ‘gap up’ or ‘gap down’, and the openings should be in line with the current trend.
- Observe the movement of this candle, and the candle’s movement should be in a direction that’s opposite to the prevailing trend.
- Once that condition is satisfied, one should ensure that the candle that’s moving in the opposite direction closes near the point of the previous day’s close.
- A pattern can be called a counterattack lines candlestick only if it can satisfy all the above conditions.
- Once the pattern is be able to identified accurately, it is advisable to wait for a confirmation candle before taking up a position, for instance, in the event of a bullish counterattack pattern, one should consider entering into a trade only if the candle that appears after the pattern is bullish, or otherwise, the bullish reversal is said to have failed.
Since the counterattack lines of a candlestick pattern are quite specific and occur rarely, it is advisable to combine them with other technical indicators before one takes a trading decision. In this way, one can minimise the chances of the trade taking an unexpected turn.