BEARISH BREAKAWAY PATTERN

BEARISH BREAKAWAY PATTERN:

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.

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.

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