Concealing Baby Swallow Candlestick Definition
The concealing baby swallow occurs at the end of downtrends and is a bullish reversal signal. The pattern consists of four candlesticks that are all black (red), and is an early sign that the downtrend is deteriorating.
Concealing Baby Swallow Candlestick Charting Example
The first two days of the concealing baby swallow pattern are two black marubozus. The third day gaps down on the open, but the price eats into the body of the second day prior to closing lower. The fourth candlestick completely engulfs the third day and closes near its low. The last day could also be a black marubozu as well, but this version of the formation is so rare, its not worth discussing. The reason the formation leads to reversals is due to the overly bearishness in the market as a result of consecutive black marubozus and finally the engulfing pattern on the fourth candlestick. This extreme bearishness over a short-term time frame in the concealing baby swallow formation, often leads to sharp counter reversals.