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The shorts may have a chance to close their positions
and realize their profits by the fourth day of a considerable
downtrend. Then we see an upward gap on the fifth day
as a result of this. If the body of the fifth day is
long, or the volume of trading is high, this may also
imply a bullish reversal.
Recognition Criteria:
1. Market is characterized by downtrend.
2. We see three long black candlesticks characterized
by consecutively lower opens and a closing sequence just
like the Bearish Three Black Crows Pattern.
3. Then we see a black candlestick on the fourth day with
an upper shadow.
4. Finally we see a white candlestick opening above the
body of the fourth day on the fifth day.
Explanation:
There is a considerable downtrend for some time and
the bears are happy. Then we see a good move downward.
Prices start trading above the opening price and almost
reaching to the new high of the previous day, but then
they close at another new low. This action is a warning
for shorts telling them that the market will not go
down forever. The shorts may then be forced to reevaluate
their positions and they may start closing their positions
on the next day if profits are good. This act is the
reason behind the upward gap we see on the last day
of the pattern and also the close is considerably higher.
If volume is high on the last day, a trend reversal
has probably occurred.
Important Factors:
A confirmation on the sixth day is suggested in the
form a white candlestick, a large gap up or a higher
close, to be sure that the market has reversed.
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