Bullish Counterattack Candlestick Pattern

The bullish counterattack, also known as the bullish counterattack lines, is a Japanese candlestick pattern that makes $17.50 in the stock market and loses $66.30 and $22.20 in the crypto and forex markets, respectively, on average per $100 risked.

We might want to pass on trading this pattern, right?

But what if I said you could make this candle pattern much more profitable by listening to the data?

Would you be interested?

If so, keep reading if you want to learn how to trade the bullish counterattack lines pattern in a profitable, data-driven way.

What Is a Bullish Counterattack Candlestick Pattern

Bullish Counterattack Candlestick Pattern Illustration

Bullish counterattack lines patterns supposedly signal a trend reversal. But history tells us that the traditional trading lore is incorrect and that this pattern is a bearish continuation.

But before we learn how to trade this Japanese candlestick pattern, we must learn how to identify this supposed bullish reversal pattern.

How to Identify the Bullish Counterattack Candlestick Pattern

Bullish Counterattack Candlestick Pattern Identification (AAPL)

The following are the requirements for a valid bullish counterattack pattern:

  • The first candle must be bearish with a long real body.
  • The second candle must be bullish.
  • The second candlestick must close near the first candlestick’s close.
  • The pattern must occur during a downtrend.

We see the bullish counterattack pattern on the Apple (AAPL) daily chart emerging on February 8th, 2020.

Price is in a downtrend as it’s below the fifty-day moving average. We then see the first candle is a long-bodied black candle. We see the second candle gap up, and the closing price is similar to the previous candle’s closing price, giving us the bullish counterattack pattern.

Now that we can identify this bullish counterattack line pattern let’s learn how to trade it on our candlestick charts.

How to Trade the Bullish Counterattack Candlestick Pattern

The bullish counterattack lines pattern should be traded as a bearish continuation in the stock and forex markets, and it shouldn’t be traded at all in the crypto market due to a lack of data.

Before we dig into how to make money using the pattern’s past performance as our teacher, let’s learn how most traders trade this candlestick pattern.

Bullish Counterattack Bullish Reversal Trade Setup

Bullish Counterattack Bullish Reversal Trade Setup (GS)

The bullish counterattack line appears on Goldman Sach’s (GS) daily candlestick charts on April 15th, 2020.

Price is in a downtrend. The first candle is bearish. The second candle gaps down, and buying pressure moves the price upward in the opposite direction, closing near the previous day’s close.

With the pattern signaled, most traders trade these patterns as trend reversals, going long at a break of the second bar’s high and placing their stop loss at the first bar’s low.

In this example, there was a lot of sideways action, and the trader didn’t take a loss as the price never went below the first day’s low.

Now that we know how most traders burn cash on this candlestick pattern, let’s learn how to profit.

Bullish Counterattack Bearish Continuation Trade Setup

Bullish Counterattack Bearish Continuation Trade Setup (DISH)

The bullish counterattack pattern appeared on the Dish Network Corporation (DISH) daily chart on February 28th, 2020.

We see bearish price action below the fifty-day moving average (barely), a continuation bear candle with a larger real body, and then another significant bullish candle closing near yesterday’s candle’s close. With the signal set, how do we profit from this pattern?

Easy.

Professional traders go short when the price breaks below the close of the trigger bar with a stop loss above the first day’s high, anticipating the bearish trend to continue.

And they say past performance isn’t indicative of future results; I would rather have a backtest on my side.

This pattern doesn’t work in all markets, but it does pretty well as a continuation in the stock market, which is significant as the stock market is usually biased upwards.

Does the Bullish Counterattack Pattern Work? (Backtest Results)

Using the following rules, I backtested the bullish counterattack lines candlestick pattern on the daily timeframe in the crypto, forex, and stock markets.

  • A close above the 50-day SMA constitutes an uptrend.
  • I tested risk-reward ranges from 1 to 5. 
  • The optimal risk-reward ratio is selected using profit per bar.
  • Entry and exits are discussed in the how-to trade section above.
  • Confirmation must occur within three days of the pattern signal.

Bullish Counterattack Bullish Reversal Backtest Results

cryptoforexstock
pattern_namebullish counterattackbullish counterattackbullish counterattack
pattern_categorybullish reversalbullish reversalbullish reversal
pattern_bars222
required_trenddowntrenddowntrenddowntrend
traded_asbullish reversalbullish reversalbullish reversal
stop_bar_typelowlowlow
entry_bar_typehighhighhigh
risk_reward125
timeframe2015-20212010-20212000-2021
bar_perioddailydailydaily
total_tickers39513516952
pattern_tickers61271534
patterns244864948
trades123443420
confirm_perc0.50.710.69
wins289668
losses102552752
win_perc0.1670.2590.195
avg_win_bars20.511.7840.78
avg_loss_bars3.34.6113.39
cons_wins133
cons_losses5810
edge-0.663-0.2220.175
cryptoforexstock
pattern_namebullish counterattackbullish counterattackbullish counterattack
pattern_categorybullish reversalbullish reversalbullish reversal
pattern_bars222
required_trenddowntrenddowntrenddowntrend
traded_asbullish reversalbullish reversalbullish reversal
stop_bar_typelowlowlow
entry_bar_typeclosecloseclose
risk_reward525
timeframe2015-20212010-20212000-2021
bar_perioddailydailydaily
total_tickers39513516952
pattern_tickers61271534
patterns244894941
trades224244083
confirm_perc0.920.870.83
wins6122846
losses163023237
win_perc0.2730.2880.207
avg_win_bars0.677.3426.82
avg_loss_bars15.884.6310.53
cons_wins333
cons_losses21010
edge0.635-0.1340.245

Bullish Counterattack Bearish Continuation Backtest Results

cryptoforexstock
pattern_namebullish counterattackbullish counterattackbullish counterattack
pattern_categorybullish reversalbullish reversalbullish reversal
pattern_bars222
required_trenddowntrenddowntrenddowntrend
traded_asbearish continuationbearish continuationbearish continuation
stop_bar_typehighhighhigh
entry_bar_typelowlowlow
risk_reward154
timeframe2015-20212010-20212000-2021
bar_perioddailydailydaily
total_tickers39513516952
pattern_tickers61271534
patterns274804932
trades122502234
confirm_perc0.440.520.45
wins123378
losses112271856
win_perc0.0830.0920.169
avg_win_bars0.028.5223.15
avg_loss_bars1.456.617.18
cons_wins126
cons_losses6167
edge-0.837-0.45-0.154
cryptoforexstock
pattern_namebullish counterattackbullish counterattackbullish counterattack
pattern_categorybullish reversalbullish reversalbullish reversal
pattern_bars222
required_trenddowntrenddowntrenddowntrend
traded_asbearish continuationbearish continuationbearish continuation
stop_bar_typehighhighhigh
entry_bar_typeclosecloseclose
risk_reward155
timeframe2015-20212010-20212000-2021
bar_perioddailydailydaily
total_tickers39513516952
pattern_tickers61271534
patterns264864964
trades264654389
confirm_perc1.00.960.88
wins8921191
losses183733198
win_perc0.3080.1980.271
avg_win_bars2.884.133.41
avg_loss_bars3.443.472.16
cons_wins5511
cons_losses3208
edge-0.3820.190.625

Bullish Counterattack Mean Reversion Backtest Results

cryptoforexstock
pattern_namebullish counterattackbullish counterattackbullish counterattack
pattern_categorybullish reversalbullish reversalbullish reversal
pattern_bars222
required_trenddowntrenddowntrenddowntrend
traded_asbullish mean reversionbullish mean reversionbullish mean reversion
stop_bar_typeatratratr
entry_bar_typepattern_lowpattern_lowpattern_low
risk_reward551
timeframe2015-20212010-20212000-2021
bar_perioddailydailydaily
total_tickers39513516952
pattern_tickers61271534
patterns274674976
trades101821839
confirm_perc0.370.390.37
wins324976
losses7158863
win_perc0.30.1320.531
avg_win_bars2.67119.043.93
avg_loss_bars6.035.154.68
cons_wins017
cons_losses375
edge0.8-0.210.061
cryptoforexstock
pattern_namebullish counterattackbullish counterattackbullish counterattack
pattern_categorybullish reversalbullish reversalbullish reversal
pattern_bars222
required_trenddowntrenddowntrenddowntrend
traded_asbearish mean reversionbearish mean reversionbearish mean reversion
stop_bar_typeatratratr
entry_bar_typepattern_highpattern_highpattern_high
risk_reward512
timeframe2015-20212010-20212000-2021
bar_perioddailydailydaily
total_tickers39513516952
pattern_tickers61271534
patterns244844973
trades91601583
confirm_perc0.380.330.32
wins196581
losses8641002
win_perc0.1110.60.367
avg_win_bars35.011.9312.92
avg_loss_bars9.8811.098.74
cons_wins174
cons_losses154
edge-0.3350.20.104

This pattern seems to forecast future, short-term volatility with a longer-term break, most likely in the direction of the existing trend.

Similar Candlestick Patterns

Multiple Japanese candlestick patterns are often confused with the bullish counterattack. It’s critical to understand the differences when using candlestick pattern technical analysis.

Bearish Counterattack vs. Bullish Counterattack Candlestick Pattern

The bearish counterattack candlestick pattern, also known as the bearish counterattack lines, is almost identical to the bullish counterattack, except that you need to reverse the rules.

The bearish counterattack pattern occurs in a bearish trend, while the bearish pattern occurs in a bullish trend.

The first bar of the bullish counterattack is a black bearish candle with a long real body, while the bullish counterattack has a more prominent white candle.

The second bar in both candle patterns moves opposite the first, with similar closing prices.

The Bottom Line

The bullish counterattack is considered a potential reversal trade, but as we often see, most trading wisdom is wrong. Like the bullish counterattack, the bearish counterattack tends to be a short-term bump in a longer-tern trend.

Leave a Comment