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The bearish meeting lines candlestick pattern begins with a bullish candlestick during a distinctly bullish trend. There is a long white candlestick on the first day of the pattern. On the second day, the market opens high, but loses ground throughout the day. This is shown by the long black candlestick. Both days close at or near the same point, meeting at the middle—hence the word ‘meeting’ in the name. Both days have long candlesticks, although the second day is generally longer than the first.
It’s easy to see what’s going on here. There is an uptrend, which is continued by the white candle of the first day and the high opening of the second day of this pattern. Clearly the market is robust as it is rallying even during off hours. However, on the second day the buyers begin to lose momentum drastically. This leads to a downturn, as shown by the long black candle. While some might write this off as a meaningless one day occurrence, it is in fact a sign that the tides are about to turn. The bulls have weakened enough to lose footing to the bears, and it is only a matter of days before the bears take over completely. The price is hovering at the edge of a precipice.
The most likely outcome in this case is a bearish reversal. The stall in the uptrend is clear, and it may have lost its steam altogether. The optimism that marked the previous days is flagging and the sellers are getting more nervous by the minute.
Your Next Move
While you should prepare yourself for a downturn, don’t take action yet. This indicator requires confirmation on a third day before moving. There is plenty of time to sell yet. However, if this pattern happens after a long bullish period, it should be treated with more significance.
Confirmation
As with most other double stick patterns, it is important to wait for confirmation on the third day. This can consist of a lower close, a black candlestick (the longer the better), and/or a marked gap down. Any kind of negative move is a confirmation that the bulls are losing control.
Similar Patterns
One of the most similar patterns is dark cloud cover candlestick pattern. However, with the dark cloud cover candlestick pattern, the gap up is not as dramatic, which suggests that the buyers are not as strong. Also, the move down is more marked. These two signs make for a stronger bearish signal that is more reliable than bearish meeting lines. Meeting lines is also much like the piercing line pattern. However, piercing lines are also more indicative of a turnaround because the second black line partially overlaps the first.
Although there are more reliable indicators, bearish meeting lines are a strong indicator that shouldn’t be ignored. This candlestick pattern can be a sign that the stock has reached its upper threshold, which is quite significant if you have invested in it. While you shouldn’t act immediately, be prepared to act if another confirmation appears.
Source : candlestickanalysis.com
