Counterattack Lines

The counterattack lines pattern is a two-candle reversal pattern that appears on candlestick charts.

Definition

The bullish counterattack lines pattern is a candlestick pattern with the following characteristics:

1. The market is in a downtrend.
2. The first candle is black with a long real body.
3. The second candle is white with a real body that’s similar in size to the first candle and a close that’s near the first candle’s close.

The bearish counterattack lines pattern is a candlestick pattern with the following characteristics:

1. The market is in an uptrend.
2. The first candle is white with a long real body.
3. The second candle is black with a real body that’s similar in size to the first candle with a close that’s near the first candle’s close.

This chart pattern is characterized by an initial gap lower or higher, followed by a strong advance in the opposite direction. With the initial trend becoming unsustainable, the market tends to reverse direction and send prices in the other direction.

The counterattack lines pattern is fairly reliable when it occurs but doesn't show up frequently in candlestick charts compared to other patterns. Traders should use the counterattack lines pattern in conjunction with other forms of technical analysis to maximize their odds of a successful trade.

The market is engaged in an active downtrend. The first candle continues the decline, with the close well below the open, generating a wide real body. This increases bear confidence while putting bulls on the defensive.  Their caution is justified at the opening of the second candle, which gaps down from the prior session's close. However, the opening depletes the supply of selling pressure, allowing bulls to lift the security in a reversal session that ends near the close of the first candle. This price action signals a potential bullish reversal that's confirmed on the third or fourth candle.

The market is engaged in an active uptrend. The first candle continues the advance, with the close well above the open, generating a wide real body. This increases bull confidence while putting bears on the defensive.  Their caution is justified at the opening of the second candle, which gaps up from the prior session's close. However, the opening depletes the supply of buying pressure, allowing bears to drop the security in a reversal session that ends near the close of the first candle. This price action signals a potential bearish reversal that's confirmed on the third or fourth candle.