Chapter 8

Utilizing Bearish Double-Stick Patterns

In This Chapter

bullet Working with bearish double-stick patterns that signal a trend reversal

bullet Predicting the continuation of a downtrend by using bearish double-stick patterns

In Chapter 7, I discuss the nature and usefulness of bullish double-stick patterns, but they aren’t the only double-stick show in town. As with most bullish patterns, bearish two-day counterparts exist, too, and you should know how to recognize and trade them, and that’s what I focus on in this chapter. These patterns work as effective sell signals, and keep in mind that when a sell signal pops up, even if you don’t have a long position on, you can use the opportunity to initiate a successful short position.

Just like the bullish patterns in Chapter 7, the bearish double-stick patterns in this chapter may appear as reversal patterns (signaling that an uptrend is coming to an end) or as continuation patterns, which tell you that a prevailing downtrend will continue. These bearish examples have two parts: the first day, which I refer to as the setup day, and the second day, which I call the signal day.

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