The bearish sidebyside white lines pattern

The bearish side-by-side white lines pattern is similar to the pattern in the previous section, but its second and third days are white candles instead of black ones. It's still a bearish pattern, but not quite as bearish.

Spotting the bearish side-by-side white lines pattern

The first day of this pattern is a long black candle in a downtrending market or stock. The second day kicks off with a gap down opening, and throughout the course of the day, the bulls push prices higher. The bulls try hard, but they're unable to push prices over the low of the first day, and this failure results in a gap.

The final day of the pattern once again sees a lower opening and a push at higher prices, and once again, the first day's low isn't reached. After two days of effort from the bulls, a gap still remains on the chart. You can see what I mean in Figure 10-22.

Figure 10-22:

The bearish side-by-side white lines pattern.

Working with the bearish side-by-side white lines

Figure 10-23 offers a look at a successful occurrence of the bearish side-by-side white lines pattern. The figure is a chart of Monsanto (MON), which is a supplier of agricultural products to farmers in the United States and Germany. The stock's exposure to agricultural markets means that it's unpredictable and presents some nice trading opportunities as a result.

Figure 10-23:

The bearish side-by-side white lines pattern predicts a downtrend continuation on a chart of MON.

Figure 10-23:

The bearish side-by-side white lines pattern predicts a downtrend continuation on a chart of MON.

The bearish side-by-side white lines show up in Figure 10-23 in a downtrend, and the first day is a down day. The second day opens with a gap down, but the bulls go to work and the stock trades up a little. However, there's a fairly substantial gap left between the first and second day. The third day opens lower, and once again, the bulls give it a go, but they don't do much to move the price into the gap between the first and second days. The result? A bearish side-by-side white lines pattern. Then for the next few days the stock is basically trendless, but soon a patient short is rewarded as the downtrend starts up again.

Fatting to predict a downtrend continuation

In a perfect world the bearish side-by-side white lines pattern would always provide a safe, comforting signal that a prevailing downtrend will continue for days, weeks, or even months to come. But this is the real world, and sometimes these things fail. For a look at how a failure can happen, refer to Figure 10-24, which represents ownership in Exxon Mobil (XOM). I'm using it for an example of a pattern with side-by-side white lines, but it's better known for a product that keeps automobiles everywhere running between the white lines.

Figure 10-24:

The bearish side-by-side white lines pattern fails on a chart of XOM.

Figure 10-24:

The bearish side-by-side white lines pattern fails on a chart of XOM.

As for the chart, the pattern appears with a downtrend in place. The first day is a long black candle, and it's followed by a big gap and a bullish second day. The gap begins to get filled during the bullish third day, and that upward momentum continues. If you wait for a rock solid failure level before exiting a short, you have to wait a few weeks, but you probably recognize the strong uptrend and exit before that painful level is reached.

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