Bearish breakaway

Type: Reversal

Relevance: Bearish

Prior Trend: Bullish

Reliability: Medium

Confirmation: Recommended

No. of Sticks: 5

We see this pattern during an uptrend marked with a bullish surge that eventually weakens. This weakening is illustrated by a long black candlestick that is unable to close the gap into the body of the first day. These events warn us about a short-term reversal.

Recognition Criteria:

1. Market is characterized by uptrend.

2. We see a long green candlestick in the first day.

3. Then we see agreen candlestick with a gap above the first day on the second day.

4. However the third and fourth days continue in the direction of the second day with higher consecutive closes.

5. Finally we see a long red candlestick on the fifth day with a closing price inside the gap caused by the first and second days.

Explanation: 

The Bearish Breakaway Pattern is constituted by a gap in the direction of the uptrend followed by three consecutively higher price days. This shows that the trend has suddenly accelerated with a big gap but then it started to fizzle, however it still manages to move in the same direction. There is evidently a slow deterioration of the trend even though the uptrend continues. Finally, we see a burst in the opposite direction completely recovering the previous three days' price action. A possible reversal is also implied by the fact the gap has not been filled. We are now ready for a short-term reversal.

Important Factors:

A confirmation on the sixth day is recommended in the form of a red candlestick, a large gap down or a lower close to be sure that there is indeed a reversal.