Today’s Pattern – The Breakaway Pattern
When you see either a bullish or bearish breakaway pattern, and the trend is evident, then the breakaway pattern indicates the acceleration of that trend. The breakaway pattern begins with a long candle representing the current trend. The following candle is the same color and it gaps away from that first long candle. While the third day’s candle can be either color, it will not show a change in the current trend. The fourth day continues the trend and therefore continues to produce the same color candles. The fifth day however, reverses the trend. Please note that it only opens slightly the opposite of the current trend and it continues in the same direction to where it then closes in the gap area.
Criteria for the Bullish and Bearish Breakaway Patterns
- The first day is a long-body day and continues in the same color as the existing trend.
- The second day gaps away from the previous close and it is the same color as the first day candle.
- Day three and four have closes that continue the trend.
- The last day is an opposite color day that closes in the gap area between day one and day two.
Pattern Psychology
After a trend, a long candle forms typically in an overbought or oversold area. The following day they gap the price further and that day continues in the same color as the current trend. For the next two following days the bulls and/or bears keep the trend going in the same direction, however with less conviction. On the final day, the trend moves opposite the existing trend with enough force to close in the gap area between day one and day two. This day completely erases the direction of the previous three days.
The secondary candlestick patterns are easy to learn once you have a basic understanding of the major candlestick patterns. Perhaps begin with the doji, bearish and bullish engulfing singals, as well as the hanging man signal to see how these signals can help you to produce profits in any market.
