The bullish sidebyside black lines pattern

The bullish side-by-side black lines pattern occurs during an uptrend, and although it includes some bearish trading, it doesn't violate the uptrend's validity. It has some bearish undertones, but it's still a fairly bullish indication of an uptrend continuation.

Recognizing the bullish side-by-side black lines pattern

The first day of the bullish side-by-side black lines is a long white candle that occurs during an uptrend. The second day opens with a large gap relative to the first day and then trades off some during the day. However, a gap is established between the first and second days even though prices trade down during the second day. The third day opens higher, much like the second day. Prices trade lower during the first day, but the gap that was established between the first and second days stays intact. The picture in Figure 9-22 is worth more than a thousand words in this case.

It may seem a bit odd that a three-day bullish pattern has two black candles as the final two days, but that's what it takes to create the bullish side-by-side black lines. It works out because the bullishness of the prevailing uptrend and the first day of the pattern are strong enough to keep the bears from closing the price gap.

ViS^l v/ If you choose to enter on the completion of the side-by-side black lines pat tern, your entry point will be a lower price point than if you made the same decision with the bullish side-by-side white lines.

Using the bullish side-by-side black lines for a profitable trade

For an example of the bullish side-by-side black lines paying off in a real-world trading scenario, take a look at Figure 9-23. It's a chart of Gannett (GCI), publisher of USA Today and operator of several high profile Web sites including CareerBuilder.com.

Figure 9-22:

The bullish side-by-side black lines pattern.

Figure 9-23:

The bullish side-by-side black lines pattern pays off on a chart of GCI.

Figure 9-23:

The bullish side-by-side black lines pattern pays off on a chart of GCI.

The days play out as follows:

1. The first day of the pattern is a white candle that occurs during a small pullback of the prevailing uptrend.

The trend appears to remain intact, but it can be moderating.

2. The second day has a gap opening and a little selling during the day.

A gap is established between the first and second days.

3. The third day of the pattern has a slightly higher opening, and some selling takes place during the day.

The gap still exists, and the day closes slightly below the open. It takes three or four days, but eventually, the uptrend is back in place and the pattern in Figure 9-23 turns out to be a winner.

Failure of the bullish side-by-side black lines pattern

For my example of a failing bullish side-by-side black lines pattern, I turn to Figure 9-24 and a chart of the drug company Bristol-Myers Squibb (BMY). This company is a very large drug corporation that develops new drugs and sells many high profile drugs already in existence. It's a great stock to trade because of the competitive nature and constant change in the pharmaceutical industry.

Figure 9-24:

The bullish side-by-side black lines pattern fails on a chart of BMY.

Figure 9-24:

The bullish side-by-side black lines pattern fails on a chart of BMY.

The first day of the pattern featured in Figure 9-24 is a very bullish day, and it helps to continue a choppy uptrend. The second day has a gap opening, and the long wick at the top of the candle tells you that the day saw some pretty heavy buying. The second day does close lower, but a gap between the first and second day is established. Prices open higher on the third day, and more selling takes place during the day. Notice that the low of the second day isn't violated, and the gap remains in place.

This signal appears to have legs for the first few days, but prices soon start to roll over. After a couple of weeks, the low of the first day is eventually violated and the signal fails. In this instance, it's prudent to exit the trade even before the stop is hit. That's easy to say after the fact, of course, but the sheer amount of time that passes while the price action appears indecisive should be enough for a trader to call it quits on the trade.

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