Bearish Separating Lines Pattern

by · December 31, 2009

BEARISH SEPARATING LINES PATTERN (BSLP)
a concern for shorts during a downtrend

Characteristics:
1. The market is on a downtrend;
2. Day 1 has a long white candlestick;
3. Day 2 has black body which has the same opening price with Day 1 (or very close to it); and
4. Day 2’s stick is a Black Opening Marubozu.

Brief Explanation:
This pattern is portrayed by a white stick that is on a downtrend which is followed by a sharply lower gap when the market opens on Day 2. This day shows an opening price equal to Day 1’s opening price and a lower closing price.

A long white body is a concern for the shorts during downtrend. This indicates that the bulls may be gaining control. If the next day opens with a downward gap and an opening price equal to the prior day’s opening price, this will restore the bear confidence.

Notes:
1. The black stick must be a Black Opening Marubozu
2. A confirmation on Day 3 is required to justify the strong downtrend (through a black stick, a large gap down or a lower close).