Bearish Counterattack

What is a Bearish Counterattack Pattern?

The Bearish Counterattack (also known as Bearish Meeting Lines) is a two-candle bearish reversal pattern that occurs at the peak of an uptrendUptrendA market direction characterized by a sequence of higher highs and higher lows.Read full glossary entry →. It is characterized by a long bullish candle followed by a bearish candle that opens with a large gapGapAn area on a chart where no trading activity took place, visible as an empty space between two consecutive candles.Read full glossary entry → up but plunges to close at the exact same level as the previous day's close. It signals that selling pressure has neutralized the buying force.

Pattern Structure

To identify a valid Bearish Counterattack:

1. UptrendUptrendA market direction characterized by a sequence of higher highs and higher lows.Read full glossary entry → Context: The market must be in an established uptrend.
2. First Candle: A long bullish (green) candle that continues the trendTrendThe general direction in which a security or market is moving over time.Read full glossary entry →.
3. Second Candle: A long bearish (red) candle. It must open with a significant gapGapAn area on a chart where no trading activity took place, visible as an empty space between two consecutive candles.Read full glossary entry → up from the previous close, but plunge to the close or below the closing price of the first candle.

Market Psychology

• Bullish Acceleration: Buyers are in control, creating a long green candle. The next day, a large gap up opens, signaling buying euphoria.
• ResistanceResistanceA price level where selling pressure is strong enough to prevent the price from rising further. It represents a "ceiling" on the chart.Read full glossary entry → Defended: At the higher price levels, large institutional sellers step in. They absorb the buy orders and aggressively drive price back down.
• Equilibrium Reached: The sellers manage to push the price all the way back down to close at the previous day's close or below .

Trading Setup

• Entry: Short on the open of the candle after a confirmation candle closes below the meeting point of the counterattack.
• Stop-Loss: Place the stop-loss orderStop-Loss OrderAn order placed with a broker to sell an asset when it reaches a specific price, designed to limit a trader's loss on a position.Read full glossary entry → just above the high of the second (bearish) candle's shadow.
• Take Profit: Target the next local supportSupportA price level where buying pressure is strong enough to prevent the price from falling further. It represents a "floor" on the chart.Read full glossary entry → level or dynamic moving average.

Confirmation Rules

• The closing price of the second candle must atleast match the closing price of the first candle within a few ticks.
• A third bearish candle must close lower to confirm that sellers have taken control.
• Selling volumeVolumeThe total number of shares, contracts, or units of a security traded during a specified time period.Read full glossary entry → should expand on the second and third days.

Common Mistakes