Forecasting Downtrend Continuations

Like the patterns described in the preceding pages of this chapter, the bearish three-stick patterns that foreshadow the continuation of a downtrend are mirror images of their bullish counterparts, which you can read about in Chapter 9. The patterns in this section are useful, but more so as confirmations for trades that are already on than as inspiration to initiate a new trading position.

You can initiate new positions by using bearish three-stick continuation patterns, but keep in mind that with trending signals there’s already been some price movement in the direction you’ll be trading (sometimes considerable price movement). Trends are your friends, but they don’t last forever.

The bearish side-by-side black lines pattern

The first of the bearish three-stick trending patterns is the bearish side-by-side black lines. It’s just plain ugly if you’re a bull or an owner of the security with price action that produces the pattern on a chart. The pattern is extremely bearish, and if you see it as you’re looking through your charts, you can feel pretty confident that the prevailing downtrend will keep on diving.

Identifying the bearish side-by-side black lines

The bearish side-by-side black lines pattern has a distinctive appearance, and you can see it firsthand in Figure 10-19.

The days play out like this:

The first day is a down day ...

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