The bearish advance block candlestick is comprised of three green or white upward candlesticks in a row with each candlestick opening below the close of the previous candlestick. Each candlestick also has a smaller range between its open and close than the previous candlestick. The advance block pattern is somewhat indicative as the three white soldiers candlestick pattern but it is bearish in nature. Unlike the three white soldiers pattern, the advance block pattern has consistently long candles and it shows signs of weakness.
The bodies of the advance block pattern are diminishing as prices rise. The upper shadows become longer which indicates that the bulls are getting more resistance to the bears. This pattern can occur in a number of different scenarios however it is most significant when it occurs in an up-trend or if it occurs during a bounce up in a downtrend. When you see this pattern it is visually obvious that the rise is losing its power.
Criteria
- Each white or green 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 up-trend or a bounce up during a long downtrend, the advance block pattern will show itself with an initial strong white or green candle day. However, unlike the Three White Soldiers, each proceeding day becomes less and less strong. If the bulls try to take the prices up then the bears step in and take them back down. After three days of waning strength the bears should confirm the reversal with further deterioration. In other words, this confirmation is visually recognized by its bearish trading in a subsequent candlestick.
Candlestick signals identify where money is flowing in and out of stocks/sectors. Being able to identify and understand the investor psychology that creates the candlestick signals produces a huge advantage. It allows an investor to participate in stock investments that have an extremely high probability of moving in the right direction.
Candlestick patterns are created by common sense investment practices. Please continue to learn about the additional secondary candlestick signals.
