The deliberation pattern can occur in both bull and bear markets. This pattern is formed by two long white (or green) bodies that are then followed by a small white (or green) candle. The deliberation pattern can resemble two other candlestick patterns, depending upon whether it is bullish or bearish in nature. The bearish deliberation pattern resembles the three black crows and the bullish deliberation pattern resembles the three white soldiers formation. It is important to note that the bullish deliberation pattern is a weaker pattern and is less popular than its counterpart, the bearish deliberation pattern. Many don’t use the bullish deliberation as a true reversal pattern but rather to signify a short-term price change indicator.
The bearish deliberation pattern occurs when there is a clear uptrend and is a bearish reversal signal. The first two candles have long white (or green) bodies and close near their highs. The last candle may open at or near the previous day’s close or it may gap up. This small third body is a sign of indecision over the current uptrend. It received its name because the Japanese say that when this signal occurs it is time for deliberation.
Criteria for the Bearish Deliberation Pattern:
- The first two white (or green) candles are relatively equally in length and are long candles
- The third day candle is a small body
- The small body opens at or very near the previous day’s close, or it may gap up slightly.
Pattern Psychology
The deliberation signal can occur after an up-trend or a bounce up during a long downtrend. Just like the advance block pattern, this pattern also represents buyer weakness. It can show the weakness in one day and indicates that a slow-down in the advance means that it is time for the bulls to get out. The deliberation pattern is slightly more difficult to recognize than the advance block pattern so be sure to carefully identify the characteristics associated with each candlestick.
Continue to learn about more candlestick patterns to see how it can greatly improve your profits! Primary candlestick patterns should be understood first (such as the doji and hanging man patterns). Once you have a basic understanding of the primary signals, then move onto the secondary candlestick signals.
