Topic: Counter Attack Lines
Type: two-way
Trend direction: Reversal
The financial markets we trade in every day are like the
center of a complex dance. The price sometimes goes up, sometimes down, and we
try to read the future price movements correctly at this rhythm time. While
trying to predict the future from past movements, technical analysis is one of
the price analysis methods that every trader should know. In technical
analysis, patterns based on Japanese candles are the tools we need most. These
patterns are represented by candlesticks, which are used in the graphical
representation of prices. One of them is a type of pattern called "Counter
Attack Lines" that can indicate trend changes. There are two different
types of these candlestick patterns:
- Bearish Counter Attack Lines Candlestick
- Bullish Counter Attack Lines Candlestick
Counter Attack Lines are like a compass that tells the story
of prices and shows the possible trend changes in the market. In this article,
we will examine the Counter Attack Lines candlestick pattern in more detail,
discussing how to interpret it and its effects on financial markets.
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| The Bullish and Bearish Counterattack Lines |
Bearish Counter Attack Lines Candlestick Pattern
Formation: The Bearish Counterattack Lines
candlestick pattern occurs in a rising market trend. It emerges when the green
(rising) candle of the first day is partially or fully retraced by a red
(falling) candle on the second day. This situation may indicate a possible halt
in the upward momentum or the beginning of a shift towards a downward trend.
The formation of this pattern is as follows:
- First Candle: In an uptrend market, the first candle is usually a green (white) candle, indicating an uptrend. This candle usually shows buying pressure and that prices are trending higher.
- Second Candle: The second candle is a red (black) candle, indicating a downtrend. This candle opens at a new high and closes at the same level or near the level of the first candle. It may also retrace some of the previous green candle. This shows that the sellers in the market are trying to balance out the previous rise.
The Bearish Counterattack Lines is a two-candle reversal
pattern. These candles can be any type, including Marubozu or other candlestick
forms. This pattern can occur not only at the end of an uptrend but also in the
middle part of an upward trend. Such patterns are found as striking
candlesticks in both the currency and stock markets.
Trading: The Bearish Counterattack Lines candlestick
pattern is often interpreted as a sign of a trend change. When observed in the
market, it is thought to signal a reversal of the prevailing uptrend. However,
it could also represent a correction within the current trend. It may signal a possible
weakness in the uptrend, indicating an increase in selling pressure, which
signifies a pullback within the rising trend. When the pattern is completed, we
can consider opening a short position. Of course, this should be confirmed by
other technical tools. We can place the stop loss order slightly above the
highest price level reached by the second candlestick (the red candlestick).
Take a look at the live trading example on the daily chart of the GOLD
commodity CFD below:
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| Bearish Counter Attack Lines in GOLD Chart |
The Bearish Counter Attack Lines are more reliable if they
occur near a resistance level. The larger the candles, the more effective the
counter attack line is.
It is important to keep in mind that Bearish Counter Attack Lines may not always give accurate signals. Risks are always present in
financial markets, such as Forex. This pattern should be used carefully by
analyzing it in conjunction with other technical indicators.
Bullish Counter Attack Lines Candlestick Pattern
Formation: The Bullish Counterattack Lines
candlestick pattern occurs in a downtrending market. It is formed by the
partial or complete retracement of the first day's red (falling) candle by a
green (rising) candle on the second day. This situation reflects the possible
weakening of the downtrend or the initiation of a transition towards an upward
trend. The formation of the Bullish Counterattack Lines is as follows:
- First Candle: In a downtrend market, the first candle is typically a red (down) candle, indicating a downtrend. Prices are normally moving lower.
- Second Candle: The second candle is a green (white) candle, indicating an uptrend. This candle covers some of the previous red candle. This shows that prices may be recovering from the previous decline. The green candle opens at a new low, but closes at the same level or near the close of the red candle.
The Bullish Counterattack Lines is a two-candle reversal
pattern. Any candles forming this pattern can generally be Marubozu or other
types of candlesticks. This pattern occurs in the middle or at the end of a
downtrend. In a market dominated by selling pressure, that is, in a downtrend,
it may indicate the beginning of an upward movement or a sign of a shift in the
trend.
Trading: The Bullish Counterattack Lines is a
technical indicator that can be used to identify buying opportunities. This
pattern, when seen in the middle or at the end of a downtrend, indicates that
buyers are beginning to surpass sellers and that prices may start to rise.
After the completion of the pattern, we can use it as a signal to open a long
position. We may place the stop loss order slightly below the lowest price
level reached by the second candlestick (the green candlestick). Take a look at
the live trading example on the daily chart of the SILVER commodity CFD below:
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| Bullish Counterattack Lines in SILVER chart |
The Bullish Counter Attack Lines are more reliable and
effective trades if they occur near a support level and the candles are larger.
Remember, trading in financial markets is risky. Bullish Counter Attack Lines, like any Japanese candlestick pattern, can produce false signals. For this reason, this pattern should not be used alone when trading in the Forex market. More solid decisions can be made by evaluating it in conjunction with other technical analysis tools and indicators.