Bearish Propulsion Candlestick Patterns – Formation and Trading Ideas
Bearish driving candlestick pattern: Technical analysis is a key method for market participants to speculate on stock price movements. It consists of several methods to predict price movements. These methods are developed based on the historical reactions and movements of prices.
One of the methods used in technical analysis is analyzing candlestick patterns. In this article, we will discuss one of the candlestick patterns called the bearish driving candlestick pattern.
What is a bearish driving candlestick pattern?
The bearish driving candlestick pattern is a two-candlestick pattern that market participants use to predict stock price movements. A candlestick pattern consists of a long green candle and a red candle. Here, the red candle should open with an upward gap and close below the green candle’s close, but above the green candle’s midpoint.
This pattern is preferably formed during an uptrend. The formation of this pattern usually indicates a bearish reversal. However, this pattern can also indicate a continuation of a bull run.
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Bearish Propulsion Candlestick Pattern – Psychology
In the case of a bearish reversal, it is preferred that the previous trend before this pattern was formed is established as an uptrend. Because the indicators this pattern provides work better.
After the first green candle is formed, the second candle opens with a gap up due to high buying pressure, but closes below the close price and above the midpoint of the previous candle. Depending on previous trends and movements, one of two things can be derived:
- Buying pressure has waned, more sellers have entered the market, and this selling pressure will continue to push prices lower. This indicates that the upward trend is likely to reverse.
- Selling pressure increased as the pattern continued. However, the second candle could not close below the midpoint of the first candle, indicating that there was not enough selling pressure to push the price lower. Therefore, prices are likely to continue to rise.
Bearish Propulsion Candlestick Pattern – Strength
Bearish candlestick patterns can signal continuations or reversals, so market participants must be able to interpret the patterns appropriately to get accurate indications of a bearish reversal. Here’s how: market participants This pattern can be better interpreted.
- If the RSI is also in overbought territory when this pattern is formed in an uptrend, the formation of this pattern is a stronger indication of a bearish reversal.
- If this pattern forms at a major resistance zone, this pattern will have a stronger reversal signal.
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Bearish Propulsion Candlestick Pattern – Trading Ideas
Traders looking to enter a long position based on this pattern must ensure that the trend prior to its formation must be an uptrend. Once this is confirmed, here are the instructions for trading:
- entry: A trader can take a short position near the closing price of the second candle of the bearish driving pattern. If a trader wants a safer entry, they can wait until the candle closes below the low price of the pattern and then take a sell position.
- Target: Traders can exit a trade when the stock’s price reaches near an immediate support zone. Once this level is reached, you can also book a partial profit on the trade and hold the remaining position until the next support level.
- Stop Loss: Traders can set a stop loss near the high price of a bearish candlestick pattern.
Bearish Propulsion Candlestick Pattern – Example
If you look at the HDFC BANK 1-day chart above, you can see a bearish driving pattern forming after an uptrend. As discussed in this article, after this pattern was formed, the price took a bearish reversal.
At the time this pattern was formed, traders were able to take short positions below Rs. 1668.65 and the stop loss was Rs. 1725.65
Bearish Drive Candlestick Pattern – Failed Example
If you look at the HDFC BANK 1-day chart above, you can see that a bearish momentum pattern has been formed. However, the price did not fall below that formation level. Since the pattern did not form in an uptrend and the price did not fall below the second candle to enter the trade, traders were able to avoid trading based on it.
Bearish Propulsion Candlestick Pattern – Limits
Because this pattern indicates both continuations and reversals, traders and market participants cannot rely on this pattern alone. Once this pattern is formed, it can become difficult to guess which direction the market will move. Sometimes there is no significant movement after the price is formed and sometimes it reverses quickly.
Therefore, market participants may find it difficult to interpret this pattern and are therefore advised to use alternative methods. technical analysis Notice the indications provided by this pattern.
Bearish Propulsion Candlestick Pattern – Key Takeaways
- This pattern preferably appears as an upward trend.
- The first candle is green, the second candle is red as it opens with a gap up and closes below the close, but above the midpoint of the first candle.
- This usually indicates a bearish reversal, but can sometimes indicate a bullish continuation.
- This pattern should be combined with other technical analysis methods as it can provide better indicators.
Read more: Bearish Counterattack Candlestick Pattern
conclusion
This article covers bearish driving candlestick patterns that commonly occur in financial markets. This specifies the conditions that must be met for a candle to be designated as a bearish driving pattern.
Traders can use these patterns to gain insight into market activity and make better trading decisions. What are your views on this pattern? Let us know in the comments section below.
Written by Praneeth Kadagi
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