BEARISH ADVANCE BLOCK
It is a pattern characterized by three long white candlesticks with consecutively higher closes during an uptrend. The Bearish Advance Block Pattern is similar to the Bullish Three White Soldiers Pattern. The difference is the fact that each successive day is weaker than the one preceding it. This may suggest that the rally is losing strength and a reversal is possible.
1. Market is characterized by uptrend.
2. We see three adjacent white candlesticks with consecutively higher closes.
3. Each day opens within the previous day's body.
4. Each day’s body is significantly smaller than the body of the previous day.
If the second and the third candlesticks (particularly the third) show signs of weakening, this means that the rally is losing steam and longs must consider protecting their positions. Longs need especially to be careful about the Bearish Advance Block Pattern during a mature uptrend. Signs of weakening are the progressively smaller white real bodies or the relatively long upper shadows on the latter two white candlesticks.
A definite deterioration in the upward strength is evidenced by long upper shadows on the second and third days.
The Bearish Advance Block Pattern is not normally a top reversal pattern, but it has the potential to precede a meaningful price decline. This pattern is more important at higher price levels. It suggests to liquidate long positions but it is yet early for short positions.
A confirmation of the reversal on the fourth day would provide the needed proof that the uptrend has reversed. A confirmation of the trend reversal by a black candlestick, a large gap down or by a lower close on the next trading day is suggested.