Written and copyright © 2008-2013 by Thomas N. Bulkowski. All rights reserved.
In my book,
Encyclopedia of Candlestick Charts, pictured on the right,
I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines
in the tests.
The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines,
performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators),
and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy
by clicking on the above link.
The bearish meeting lines candlestick pattern is a two line candle composed to tall white and black candles in an uptrend. The two candles meet near the closing price of each. The
pattern is supposed to be bearish, but testing found that the pattern acts as a bullish continuation 51% of the time. That is random.
The frequency rate suggests the bearish meeting lines
candlestick is somewhat rare, but the performance over time is very very good. Thus, trade in the direction of the breakout and hang on for the ride.
Bearish Meeting Lines Important Results
Theoretical performance: Bearish reversal
Tested performance: Bullish continuation 51% of the time
Frequency rank: 63
Overall performance rank: 16
Best percentage meeting price target: 60% (bull market, up breakout)
Best average move in 10 days: 7.16% (bear market, up breakout)
Best 10-day performance rank: 12 (bear market, up breakout)
All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.
The above numbers are based on hundreds of perfect trades. See the glossary for definitions.
Bearish Meeting Lines
Bearish Meeting Lines Discussion
The bearish meeting lines candle pattern, in theory, works as a bearish reversal of the uptrend, but testing shows that it acts as a bullish continuation 51% of the time. In other words,
the breakout direction is random. Once price breaks out, it tends to trend, giving an overall performance rank of 16th out of 103 candles, which is near the top of the list.
The best average move 10 days after the breakout is a very strong 7.16%, ranking 12th. I consider moves of 6% or higher to be good, so this does very well, indeed. Thus, wait for
the breakout and then trade with the trend.
You will find that most candles that have breakouts that rejoin the primary trend do best. Thus, since the trend leading to the candle is upward, an upward breakout would likely
see a longer trend than a downward breakout in an uptrend. With the bearish meeting lines candle, continuations outperform reversals.
Do not assume that continuations of all candlestick
types perform better than reversals. In the bearish meeting lines candle pattern it does, but I found that reversals work better than continuations 59% to 41% of the time (see page 18
of my Encyclopedia of Candlestick Charts book.
Bearish Meeting Lines Identification Guidelines
|Number of candle lines||Two.|
|Price trend leading to the pattern||Upward.|
|Configuration||Look for a tall white candle in an upward price trend. Following that, the next candle should be a tall black one. The closes of the two candles should be "near"
one another, whatever that means.|
Three Trading Tidbits for Bearish Meeting Lines
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book
where the tips appear.
- Bearish meeting lines candles that appear within a third of the yearly low perform best -- page 573.
- A lower close the day after the bearish meeting lines candle completes suggests a reversal 67% to 70% of the time -- page 575.
- Bearish meeting lines in a bear market within a third of the yearly high act as continuations most often. -- page 576.
Bearish Meeting Lines Example
Since the identification guidelines call for tall black and white candles, the bodies can be any size, with long or short shadows. Thus, you can get some weird looking candles.
Circled in red, are bearish meeting lines. The candles are tall ones but their bodies are short. The closing price of each of the two candles
are at or near the same price. The upward price trend is brief, and the breakout from this candle pattern is also upward.
I added green lines to highlight three ascending scallop chart patterns. Ascending scallops are J-shaped patterns.
Notice how each bowl of the scallop is less deep or wide than
the prior one. That progression hints of a trend change. But I have also found the reverse, where each ascending scallop gets wider or deeper and then the price trend changes.
-- Thomas Bulkowski
Copyright © 2008-2013 by Thomas N. Bulkowski. All rights reserved. I don't approve of political jokes. I've seen too many of them get elected.