Concealing Baby Swallow

This pattern is characterized by two black marubozus. Marubozus are real bodies without shadows that extend from either end of their body. A black marubozu is a long black body with no shadows and it is considered to be a weak indicator as opposed to the white marubozu that is considered to be a strong indicator. Additionally the black marubozu indicates that its open is equal to its high and its close is equal to its low.

The concealing baby swallow consists of two consecutive black marubozus that demonstrate the continuation of a downtrend in the market. In order to identify this pattern the following conditions must be met. First, the market must have been in a downtrend for a good period of time. Second, there are two consecutive marubozus as described above in the first and second days. The third day consists of a black candlestick that gaps down from the previous day’s close and trades into the body of the second day. Finally, the fourth day consists of another black marubozu that engulfs the third day, including the shadow. This last day opens above the previous day’s high and closes below the previous day’s close.

What does the concealing baby swallow candlestick indicate is occurring in the markets?
The two black marubozus, to the bears delight, show that the downtrend continues. The third day further confirms this downtrend, but the prices on the third day begin to go above the close of the previous day and it eventually closes at or near its low. This causes concern for the bears and the bulls begin to buy at low prices. The last day opens higher showing a significantly higher gap that again causes concern for the bears. The bulls begin to buy at low prices and the bears continue to short.

The reliability of this pattern is very high and confirmation for the concealing baby swallow occurs in the form of a white candlestick with a higher close or a gap-up.

Japanese Candlesticks are the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, expand your expertise by learning the various secondary Candlestick Patterns . Combine these with your favorite Technical Analysis indicators, such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or Exchange Traded Funds .

Please continue your candlestick pattern education and read about the stick sandwich pattern.