The Advance Block Candlestick Pattern
The Advance Block
The Advance Block candlestick pattern is a potential bearish trend reversal pattern that can appear in an uptrend. It is similar to the Three Advancing White Soldiers pattern and the Stalled pattern.
The Advance Block Formation
The Advance Block pattern consists of three successive candlesticks that, while they are light in color and are thus bullish, indicate a weakening of the underlying trend with each of the tree candlesticks making a higher high but each having successively shorter real body and, possibly shorter wicks or shadows, than the preceding candlestick.
Understanding the Advance Block Pattern
The shorter real bodies (and possibly longer shadows) of the successive candlesticks indicate an increasing weakness in the underlying uptrend. This points to a potential end to a rally and the possible emergence of a downtrend.
Trading the Advance Block
The Advance Block pattern is a moderate pattern and does not necessarily indicate the emergence of a downtrend as the candlesticks that form it are still bullish in nature. Therefore, this pattern should be used more to protect a long position rather than entering a short position. After the Advance Block has completed, a subsequent move of the price chart below the middle of the second candlestick’s real body indicates that a bearish reversal is more likely and traders could consider closing their long positions. A bearish candlestick pattern, such as the Hanging Man or the Evening Star pattern, should be used to enter a short position.