I recently talked about the bearish version of the Separating Lines pattern. Today, it’s just for the bulls.

Separating Lines (Bullish) Basics

The concept is simple for the Separating Lines pattern. The bears take control for a day within a bullish trend, put up a longer marubozu candle, and the bulls take charge the next day. The result is the stock gapping higher to the previous day’s open and then extending the gains to close near the high of the session. Within a strong, bullish trend, sometimes you only get one down day in the mix of up days. This may be an indicator to watch for when to enter.

• Overall Rating: 3 Star.
• Directional Bias: Bullish Continuation.
• Number of Candles: 2.
• Frequency Rating: 2 Star.
• Pattern Description: The Separating Lines pattern occurs within an uptrend. The first candle of the formation is a tall, closed candle. The next candle gaps up near the previous day’s open and continues to trade higher, forming a tall open candle.
• Volume Description: Rising volume during the formation of a Separating Lines pattern with higher volume on the breakout increases performance.
• Statistical Notes: Taller Separating Line patterns with long bodies or shadows that occur in a neutral or bullish primary trend increase performance.
• Measuring Technique: Add the trading range of the pattern to the close of second candle.

Conclusion

With a market that is melting up like it is, it can be hard to pick an entry. A lot of times, you only get one down day and it’s off to the races. The question then becomes, how much does it need to pull-back in order to provide a reasonable entry? At least for the Separating Lines pattern, it can be clearly defined.