Counterattack Lines Candlestick Pattern: Two-Bar Reversal

The concept of candlestick chart patterns started before the bars and pie charts to determine the accurate yet probable stock’s position in the market. Through these patterns, the traders can comprehend the shifts in the price of a particular company’s stock. These candlestick charts also identify trend reversal patterns like counterattack lines. In this article, you’ll be learning about the counterattack lines and the psychology behind this reversal pattern.

Counterattack Lines

Counterattack lines definition states that they are lines that indicate reversal patterns exhibiting two candlesticks going on contrary routes. These lines convey a message to the traders about the forthcoming reversal trends in the existing market. The counterattack lines appear at the time of either an upward trend or downward trend. From these candlesticks, traders can see and comprehend two patterns, i.e., bullish & bearish respectively.

If the counterattack lines pattern appears during a downward trend, then the pattern variant is bullish, and vice-versa for bearish. To describe the candlestick lines, the bullish counterattack pattern opens with a black candle whereas the bearish opens with white. Two key things need to be met before confirming whether it’s a bullish counterattack candlestick pattern or not.

• There should be an extreme downward movement to witness a bullish trend in the market.
• The first candle appears in black with a real body followed by a white candle closing not far away from the black candle.

This goes the same with bearish counterattack lines candlestick pattern.

• There should be an extreme upward movement to witness a bearish trend in the market.
• The first candle appears in white with a real body followed by a black candle which is almost of the same height as the first one.

The counterattack line pattern doesn’t keep coming on the candlestick charts now and then as they are particular. To gain good returns during this reversal trend, traders should use counterattack lines along with other Technical analysis strategies. Traders can use the stop loss option as per the price shifts that take place after the bullish and bearish reversals. This is a signal candle that exhibits the price shift as per the traders’ expectations.

Psychology of Counterattack Lines

The foremost thing you need to do as a trader is to identify the counterattack lines candlestick pattern. Once identified, check the two candles, and whether they are of distinct colours (black and white). Next, check whether it opens in the gap up or gap down direction.

Now, keep an eye on the candlestick movements. Here, the movement of the candle should showcase in a direction that’s entirely the reverse of the current trend. Below is the bullish and bearish counterattack lines trader psychology:

Bullish Counterattack Lines Trader Psychology

These candles are opposed to the existing downward trend in the market. It starts with a decline and closes beneath the open thereby giving rise to a candle with a long body. Next, the second candle opens, giving rise to a gap under the last close.

As and when the second candle appears on the candlestick chart pattern, it signals that the market is close to a bullish reversal trend. The price action asserts on the third or fourth action, tipping the trader about the bullish reversal trend.

Bearish Counterattack Lines Trader Psychology

In this pattern, you witness the uptrend market. The initial counterattack lines candle progresses ahead and closes over the open, thereby creating a long candle.

Here, the bears go defensive while it’s the opposite in the bullish case. The counterattack lines opening diminishes the buying pressure, removing the security of the bears that are going in the opposite direction, thereby closing the initial counterattack lines candle. The price action asserts on the third or fourth candle, tipping the trader about the bearish reversal trend.

How To Use Counterattack Lines?

To comprehend how counterattack lines work, you first need to identify the pattern on the candlestick chart. Post that, you have to spot the trend reversal patterns like bullish or bearish before kickstarting your trade.

As and when you spot the trend reversal types, go for the candle openings to check whether they started with a gap up or down. Also, ensure to check that these lines are aligned with the existing trend. The progress of the candle should be in line with the opposing current trend. If this candle goes in opposition to the trend, see that the candle closes approximately near to the earlier one.

Meeting all the aforementioned conditions gives rise to the counterattack lines pattern. The next thing the trader has to do is hold on tight till the confirmation candle gives the green signal to take the position in the market. You should enter the trade only when you see the movement after the first two candles or the third and fourth respectively. Say, if you are entering a bullish reversal, check with the confirmation indicator before proceeding with the trade.

It’s suggested for traders to mix the counterattack lines pattern with other forms of technical analysis to get desired results. By doing so, traders can prevent any future losses or shun from getting failed in the trade.