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How to trade Advanced Block Candlestick Patterns in Financial Markets

The Advance Block Candlestick Pattern, its features such as Entry, Stop Loss, and Target points, and how it is used in Forex and Stock Trading.

Experienced traders know that using only one analysis method to understand price movements in the market is not very accurate. Therefore, they attempt to combine fundamental analysis with technical analysis tools. Among the most noteworthy techniques in technical analysis are 🎌Japanese Candlesticks. Candlestick patterns provide valuable insights into charts, market psychology, and supply-demand balance. ✍In this article, we will examine what the "Advance Block" candlestick pattern is, how it is defined, and how it can be used. We will also take a look at real market examples. Let's get started.

Topic: Advance Block

Type: Bearish

Trend direction: Reversal

Opposite pattern: Descent Block

What is the Advance Block candlestick pattern 

The Advance Block pattern is defined as a technical analysis model consisting of three consecutive bullish candlesticks that occur after an uptrend, signaling a possible downtrend. This pattern is usually a pullback and sometimes a reversal pattern, indicating the start of a downtrend. The picture below shows an example of the different variants of the Advance Block candlestick:

Exploring various types of Advance Block Candlestick Patterns developed during trading hours in the Stock Market.
Various Types of Advance Block

What is the structure of the Advance Block candlestick pattern 

The Advance Block pattern emerges when three consecutive candlesticks meet specific criteria:

  1. The first candlestick is part of an uptrend and has a green (or white) body.
  2. The second candlestick also has a green (or white) body, and its opening price falls within the range of the previous candlestick's body, while its closing price is above the previous closing price.
  3. The third candlestick is also green (or white), with its opening price within the range of the previous candlestick's body, and its closing price above the previous closing price. Example image below.

Image describing the structure of the Advance Block Candlestick Pattern for those interested in Technical Analysis
The Structure of the Advance Block

Now let's look at a real market example:👀

The structure of the Advance Block candlestick pattern illustrates the real market with the strengthening of bears on the SP 500 Index chart.
Advance Block Candlesticks on the SP 500 Index chart

Why does the candlestick pattern form like this 

The Advance Block candlestick pattern is a formation consisting of three consecutive bullish candlesticks that begin with a strong bullish candle. The characteristics of these candlesticks reveal changes in market psychology and indicate possible signs of a trend reversal or potential retracement. This image provides the best example of the Advance Block pattern forming on the Coca-Cola Company stock chart, indicating a pause in the uptrend and a potential retracement:

Advance Block Candlestick Pattern in Coca-Cola Company's Stock Chart is a strong indicator of the end of the Rising Trend and potential Pullback.
Advance Block Pattern in Coca-Cola Company's stock chart

The first candlestick, by showing an impressive rise, indicates that the market is firmly under the control of the bulls. Being long and having a green (or white) body, it reflects strong buying pressure in the market.

However, the second candlestick starts below the closing of the first bullish candlestick, signaling a slowdown in the upward momentum. Some bullish traders consider this as a negative sign because it is the first indication of weakness. However, the second candlestick still closes above the previous closing price and maintains a green (or white) body. Thus, the belief that the bulls are still in control persists.

On the other hand, the third candlestick opens just below the second candlestick's opening and tries to attract bulls in the market, but it closes above the previous closing price. Now, signs of weakness become more apparent. The candle bodies are getting shorter, indicating increased indecision in the market. The candles form with lower openings inside the previous body, and the upper shadows are progressively elongating while the difference between the opening and closing prices diminishes. All these signs expose that the uptrend is losing its strength. Bulls have now started to lose the 🤺battle because the pattern is completed with the last candlestick, which signifies a potential reversal or retracement.


How to trade the Advance Block candlestick pattern 

🕘Waiting for the candlestick pattern to fully form is our first step. The formation is not complete until the closing of the third candlestick, so we need to be patient. Afterward, we consider identifying the confirmation level and applying stop-loss and take-profit orders. The confirmation level is determined as the midpoint or the opening point of the last green (or white) body, and for the formation to be confirmed, prices need to break below this level. At this point, we can enter a sell order. First, let's take a look at the following image:

Waiting for Confirmation Level in the Advance Block Candlestick Formation, setting Stop Loss, and Take Profit orders.
Trading with Bearish Advance Block Candlesticks

When setting the stop-loss level, we should choose the higher of the two highest prices from the last two days. Placing our stop-loss just above the peak of the third candlestick in the formation will help us avoid being stopped out prematurely if the uptrend continues, while also providing a safety margin against a sudden reversal.

When determining the take-profit points, the low of the first candlestick that forms the pattern is often chosen as the target. Additionally, using support and resistance levels, trend lines, and Fibonacci tools would be a more reasonable option. Let's also give an example image from the real market. The following image presents an example of trading with the Advance Block candlestick pattern in Taiwan Semiconductor Manufacturing Company Ltd. Stock:

Trading example with Take Profit, Stop Loss, and Entry points using the Advance Block Candlestick pattern in Taiwan Semiconductor Manufacturing Company Ltd stock
Bearish Advance Block Candlesticks in TSM stock chart

Note. Although there are some similarities between the "Advance Block" candlestick pattern and the "Three White Soldiers" candlestick pattern, they are never the same. There are significant differences between the patterns. Specifically, the "Three White Soldiers" consists of rising candles with filled bodies, indicating a continuation of an uptrend. On the other hand, in the "Advance Block" pattern, the second and third candlesticks start inside the body of the previous candlestick, and the third candlestick has the longest shadow. The most striking difference is that this pattern is considered a temporary retracement or a reversal formation.

Information. The opposite of the Advance Block candlestick pattern is the Descent Block candlestick pattern.

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