Bearish Counterattack Line

The Bearish Counterattack Line is composed of two Japanese candlesticks of opposite colour that have the same closing price.

It is a not-so-powerful reversal pattern that is significant over all time units. 

Its characteristics are as follows:

• The Bearish Counterattack Line must appear after an uptrend.

• The body of the 1st candlestick is green and preferably powerful.

The 2nd candlestick must be red; it should preferably open gap up and close at almost the same level as it did the day before.

Such a pattern appears after an uptrend, the day after gains were made, when prices open gap up while bullish forces dry up and prices fall before finally closing at almost the same level as they did the day before. This forms a long red Japanese candlestick. The trend remains bullish but stakeholders who were positioned higher start to doubt the strength of the trend since prices have not stayed at their highs despite the strong gap up.

Traders grow impatient and their stops often become more frequent in order to protect their gains. Some contrarian traders begin to position themselves. If prices fall again the day after, the trend is likely to reverse what would validate the pattern. In this example, the day after forms a long red candlestick that launches a new downtrend.

The longer the Japanese candlesticks and the wider the gap, the more significant the pattern is. A Bearish Counterattack Line still remains less powerful than a Dark Cloud Cover or a Bearish Engulfing.

Regardless of the quality of the Counterattack Line, it is wiser to wait for the confirmation of the pattern by the next Japanese candlestick that should be bearish. Other signals can reinforce this pattern. It can appear below a previous resistance for example.

The invalidation threshold can be placed above the highest point of the pattern.