What Are Counterattack Lines?
The counterattack lines pattern is a two-candle reversal pattern that shows up on candlestick charts. It can happen during an uptrend or downtrend. For a bullish reversal during a downtrend, the principal candle is a long black (down) candle, and the second candle gaps down however at that point closes higher, close to the close of the main candle. It shows that merchants were in control, yet they might be losing that control as the buyers had the option to close the gap down.
For a bearish reversal during an uptrend, the principal candle is a long white (up) candle, and the subsequent candle gaps higher however at that point closes lower, close to the close of the primary candle.
Understanding Counterattack Lines
The pattern shows that the buyers might be losing control during an uptrend or that merchants might be losing control in a downtrend.
The bullish counterattack lines is a candlestick pattern with the following qualities:
- The market is in a downtrend.
- The main candle is black (down) with a long real body.
- The subsequent candle gaps down on the open, is white with a real body that is comparative in size to the principal candle, and closes close to the primary candle's close.
The bearish counterattack lines is a candlestick pattern with the following qualities:
- The market is in a uptrend.
- The primary candle is white (up) with a long real body.
- The subsequent candle gaps higher on the open, is black with a real body that is comparable in size to the principal candle, with a close that is close to the main candle's close.
This chart pattern is described by a gap in the current trending course at the opening of the subsequent candle, followed by a strong move the other way to close the gap. With the initial trend becoming unsustainable, the market will in general reverse bearing and send prices in the other course (heading of the subsequent candle).
Counterattack lines are a genuinely specific pattern and thusly don't happen often on candlestick charts. Traders ought to utilize the counterattack lines pattern related to different forms of technical analysis to boost their chances of a fruitful trade.
Numerous traders hang tight for a confirmation candle following a candlestick pattern. A confirmation candle is a price move in the expected bearing. For instance, following a bullish reversal, the price is expected to rise. A trade isn't taken until the price really begins to rise. A similar concept applies to a price decline following a bearish reversal.
Whenever confirmation has happened and a long trade has been placed, a stop loss can be set below the low of the pattern. When a short trade has been confirmed, a stop loss can be set over the high of the pattern.
Bullish Counterattack Lines Trader Psychology
Assume the market is participated in an active downtrend. The primary candle proceeds with the decline, with the close well below the open, generating a long real body. This increments bear confidence while putting bulls on the defensive. Their watchfulness is justified at the opening of the subsequent candle, which gaps down from the prior session's close. In any case, the opening exhausts the supply of selling pressure, allowing bulls to lift the security in a reversal session that closures close to the close of the primary candle. This price action signals a potential bullish reversal that is confirmed on the third or fourth candle.
Bearish Counterattack Lines Trader Psychology
Assume the market is taken part in an active uptrend. The primary candle proceeds with the advance, with the close well over the open, generating a long real body. This increments bull confidence while putting bears on the defensive. Their mindfulness is justified at the opening of the subsequent candle, which gaps up from the prior session's close. Notwithstanding, the opening drains the demand to buy, allowing bears to drop the security in a reversal session that closures close to the close of the primary candle. This price action signals a potential bearish reversal that is confirmed on the third or fourth candle.
Illustration of How to Use Counterattack Lines
Counterattack lines are best utilized related to different forms of analysis, since they will not necessarily in all cases bring about a reversal.
The main bullish counterattack lines on the Apple Inc. (AAPL) daily chart happened during a downtrend, and the strong buying on the subsequent candle shows a likely reversal in the downtrend. In this case, the price moved just barely higher and afterward the downtrend proceeded.
On the second and third models, the price moved higher following the patterns. Both of these patterns were made with generally small candles. In a perfect world, the pattern ought to have large candles, as in the primary model. Yet, in these cases, the smaller candles brought about the expected bullish reversal.
These models are bullish counterattack lines; consequently, when the price began moving higher following the pattern and a long trade was initiated, a stop loss might have been set below the low of the pattern.
Candlestick patterns don't have profit targets, so it depends on the trader to determine how and when they will take profit.
Difference Between Counterattack Lines and an Engulfing Pattern
The two patterns are made by candles of inverse tone/bearing. The engulfing pattern is different in that the candles are side-by-side, with the subsequent candle's real body completely encompassing the real body of the first. It is likewise a reversal pattern.
Limitations of Using Counterattack Lines
Counterattack lines may not be reliable all alone. Regularly they require confirmation candles, and are best utilized related to other affirming technical analysis.
Candlestick patterns additionally don't give profit targets, so there is no indication of how large the reversal might be. The pattern might begin a long-term reversal, or the reversal might be exceptionally short-lived.
Albeit the pattern happens, it's not successive. Opportunities to utilize this candlestick pattern will be limited.
- Bearish counterattack lines signal a possible reversal from an uptrend into a downtrend.
- Bullish counterattack lines signal a likely reversal from a downtrend into an uptrend.
- The pattern is made out of two candles of inverse tone/heading. The utilization of a third as well as fourth candle that affirms the next price course following the pattern is suggested.