Concealing Baby Swallow Candlestick

The first two days are Black Marubozu days (open is the high of the day and the close is the low of the day). The following day is a black day that gaps in the same direction but trades up into the body of the second day. The final day is a Black Marubozu that gaps up and sells off to engulf the third day.

In a downtrend or within a pullback of an uptrend, the two consecutive Black Marubozus indicate the bears are in complete control. The gap down on the third candle is bearish and attempt #1 is made to rally the stock (as evidenced by the upper shadow). Attempt #2 comes on the next day’s gap up, but the stock sells off again to indicate the bulls are throwing in the towel. But this is why the pattern works. Once the bulls are given up, there are no more sellers, so the down trend stops. Once the shorts start to cover, there are no sellers to stand in the way of a bounce.

Pattern: reversal
Reliability: high