Bulkowski’s Bearish Breakaway

Written and copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved.

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 bearish breakaway candle is a five line pattern, a clue that it will be difficult to find. In fact, it has a frequency rank of 98 where 1 is prolific out of 103 candlestick types. It acts as a bearish reversal 63% of the time, ranking 23rd, which I consider good. In a bear market, though, it sports a reversal rate of 89%, ranking 2nd. The overall performance ranks 11th, which is also very good.

Important Results for Bearish Breakaway

Theoretical performance: Bearish reversal Tested performance: Bearish reversal 63% of the time Frequency rank: 98 Overall performance rank: 11 Best percentage meeting price target: 35% (bull market, down breakout) Best average move in 10 days: 6.66% (bull market, up breakout) Best 10-day performance rank: 2 (bear market, up 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. The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Bearish Breakaway

Bearish Breakaway Discussion

Since the bearish breakaway candlestick is so rare (frequency rank of 98), I did not include performance statistics in my book, Encyclopedia of candlestick charts. I offer a few of them here.

The bearish breakaway acts as a bearish reversal 63% of th time, which is quite respectable. Overall performance ranks 11 where 1 is best out of 103 candlestick types. That is a very good score. Unfortunately, the candle tends to be a tall one, so price rarely hits the measure rule target. The target is based on the height of the candlestick pattern added to the upward breakout price or subtracted from the downward breakout price. Price hits the target just 35% of the time after a downward breakout in a bull market. And that represents the best performance, too. The best average move 10 days after the breakout is a rise of 6.66% where I consider moves above 6% as wonderful. The best performance rank is second, belonging to upward breakouts in a bear market.

Bearish Breakaway Identification Guidelines

Bearish Breakaway Example

Shown circled in red is one of the few bearish breakaway candlestick patterns that I could find. The first day is a tall white candle followed by another white candle with a gap between the two bodies. Days 3 and 4 are white candles, both of which have higher closes. The last day in the pattern is a tall black candle that closes within the gap set by the first two candles. Yes, this is a complicated pattern and that is why you won’t find it often.

When the bearish breakaway completes, the upward trend reverses and price breaks out downward. In this case, price does not drop all that far, at least for the days shown.

-- Thomas Bulkowski

Copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved. I took an IQ test and the results were negative.