Concealing Baby Swallow candlestick pattern

The Concealing Baby Swallow is a bullish reversal pattern consisting of four bearish candlesticks, each with unique features, body size and shadows. The pattern is not commonly seen in trading.

The pattern reveals market behavior in a downtrend and signifies a bullish trend reversal, reflecting weakening bearish influence, despite attempts to lower the price throughout the day.

The buy signal is usually confirmed by a fifth candlestick surpassing the fourth candlestick shadow at the closing price. This pattern often leads to sharp counter reversals due to the market's extreme bearish nature (can be seen with consecutive 2 red marubozu candlesticks and a final engulfing pattern on the fourth candlestick).

Construction

1st

• continuation of downtrend
• red body
• Maribozu candlestick (i.e. without shadow)

2nd

• red body
• Maribozu candlestick (i.e. without shadow)
• candlestick opens within prior candlestick body
• candlestick closes below closing price of 1st candlestick

3rd

• red body with long upper shadow and no bottom shadow (look like High Wave candlestick)
• upper shadow enters prior candlestick body^①
• candlestick opens below closing price of 2nd candlestick^②
• closes at another lower level

4th

• long red body
• candlestick body covers prior candlestick body including shadows (is engulfing 3rd candlestick)^③

This is a very rigid model that does not allow for much flexibility. The gap between the second and third candlesticks is obligatory, and the upper shadow of the 3rd candlestick must extend inside the body of the previous candlestick. In addition, the candlestick must completely absorb the trading range of the previous one. Small changes in the relative sizes of the candles can be allowed.

You should always place your stop loss order below the lowest point of the pattern. This is the area below the lower shadow of the 4rd candlestick – the engulfing candle.