SEPARATING LINES PATTERNSeparating Lines
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Its a rare 2 candlestick pattern. Basically a continuation pattern but sometimes can also be seen at the end of a pullback.
In an uptrend, you will observe a strong bearish day with poor closing but next day the stock opens at the open of the prior bearish day. Thus it negates all the bearishness of the previous day and forces bears to cover their positions. A strong closing completes the pattern. Yes, a strong close on the second day, near the highs, is important.
The opposite is true in case of a downtrend.
Some variations relating to the second day are possible:
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It may open above the open of prior day, hence more bullish. It may open slightly below the previous day open, but still qualifies for the pattern if confirmed by the closing.
A low risk entry technique:
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On the second day, the stock will have a strong rally at the market open, suggesting bulls are back. Then the stock gyrates till the later half of the day before shooting up again. The afternoon consolidation may provide ample opportunities to enter at lower risk for a swing trade.
I just hope that this information would be useful to you.
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Regards
JJSingh
