|
Written and copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved.
Advance Block Overview
In my book,
Encyclopedia of Candlestick Charts  , pictured on the right,
I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines
in the tests.
The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines,
performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators),
and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy
by clicking on the above link.
The advance block candle is one that I like, but I am not sure why. It is supposed to act as a bearish reversal, but testing shows it is really a bullish continuation pattern. The
reversal is just above the "near random" range of 51% to 59%, where so many candle patterns seem to reside. With a frequency rank of 65 out of 103 candles, it is not a popular rock star,
either. The post breakout trend is also mid list. I am losing my enthusiasm for this candle pattern...
Important Advance Block Results
|
Theoretical performance: Bearish reversal
Tested performance: Bullish continuation 64% of the time
Frequency rank: 65
Overall performance rank: 54
Best percentage meeting price target: 53% (bull market, up breakout)
Best average move in 10 days: -4.76% (bear market, down breakout)
Best 10-day performance rank: 32 (bull market, down breakout)
All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.
|
 Advance Block
|
Advance Block Discussion
As I mentioned in the introduction, the advance block is supposed to act as a bearish reversal, but doesn't. In fact, it acts as a bullish continuation pattern 64% of the time.
The overall performance rank is 54, which is mid list out of 103 candles.
The best move 10 days after the breakout is an average drop of 4.76% in a bear market. I consider moves of 6% or higher to be good, so this one falls well short of that. However,
the best performance rank is 32, which is respectable. You will find that the best performance comes from advance block candles with downward breakouts.
Identification Guidelines
| Characteristic | Discussion |
| Number of candle lines | Three. |
| Price trend leading to the pattern | Upward. |
| Configuration | Look for three white candles in an upward price trend. On each candle, price opens within the body of the previous candle. The height of the shadows grow taller
on the last two candles. |
Three Trading Tidbits for Advance Block
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book
where the tips appear.
- For advance blocks that signal a reversal, look for them in an upward retracement of a downward price trend -- page 103.
- Select tall candles for the best performance -- page 101.
- The advance block breaks out upward most often -- page 105.
Advance Block Example
I consider this chart a wimpy example of an advance block candlestick pattern. In an upward price trend, price forms a tall white candle followed by two smaller bodied white candles
(the tall candle is not a requirement, but an observation in this example).
Each of the last two candles has taller upper shadows when compared to their body height.
The candle pattern shows the progression from bullish enthusiasm to bearish warning. On the last two
candle lines, bulls push price higher only to be beaten back down by the bears. But that does not stop the bulls because a few days later, price stages an upward breakout by closing above
the top of the pattern.
Since price trends upward leading to the advance block and breaks out upward, this is an example of a continuation pattern. That is not how theory says the candle works, but you will
find it behaving as a continuation almost two-thirds of the time.
-- Thomas Bulkowski
Copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved. A conclusion is simply the place where you got tired of thinking.
|
. If you buy ANYTHING, they pay for the referral.
on 