Bullish Breakaway Candlestick Pattern

Bullish breakaway is a market reversal candlestick pattern, indicating the end of an existing downtrend and start of a new uptrend (usually short-term reversal). It is a five candlestick pattern which first indicates the acceleration of existing downtrend, then slowing of it and finally the trend reversal.


The requirements of a bullish breakaway candlestick pattern include,

• The pattern should form at the bottom of the existing downtrend.
• The first day is a long bearish day characterized by a long black (colored) candlestick.
• The second day candlestick opens a gap below the first candlestick (except in forex charts) and closes at a new low (indicating trend acceleration). The real-body of the candlestick is smaller than first day candlestick.
• The third and fourth day candlesticks are also at the direction of existing downtrend with lower closes than previous candlestick. Third day candlestick can be bearish or bullish.
• On fifth day, there is a long bullish (white/colorless) candlestick, which closes in the gap between first and second day candlestick (except forex charts, where it can close into the real-body of first or second day candlestick).

Bullish breakaway candlestick formation occurs when bears fail to continue existing trends after the second day opening. Prices are now at oversold conditions and the trend is getting weaker and weaker, indicated by small real-bodies of second to fourth candlesticks. The first day marks the market reversal; which is expected to continue as the gap created is not filled.

Bullish breakaway candlestick pattern is a moderately reliable candlestick pattern. Reliability can increase with increase in gap, shortening of real-bodies of middle day candlesticks and with increase in trading volume on fifth day. Confirmation of trend reversal can be a gap up, a higher close or a bullish candlestick on sixth day.

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