Bearish Separating Lines Candlestick Patterns Explained: What They Are & How To Trade Them

What Is a Bearish Separating Lines Candlestick Pattern?

A bearish separating lines is a bearish continuation formation.  They occur during downtrends and consist of 1) a large-bodied candlestick moving up and 2) a large-bodied candlestick with the same open as the first candle that moves down.

It is the bearish version of the separating lines pattern, and therefore the opposite of the bullish separating lines pattern.

Of course, no candlestick pattern guarantees a particular outcome.  They are more like suggestions than promises.

So, what do bearish separating lines patterns really tell you?

What Bearish Separating Lines Patterns Mean

Unlike some patterns, English speakers do not use the Japanese name for this one.

The term “separating lines” reflects the nature of the pattern, two candles with the same origin and diverging endpoints.  While this does describe the pattern fairly well, it isn’t that memorable and doesn’t provide much insight.  This is fairly typical of candlestick pattern naming conventions.

In trading terms:

1. First Period – The price increases significantly, contrary to the downward trend.
2. Pre/Post-Market Trading – The price decreases significantly, all the way back to the open of the first period.
3. Second Period – The price decreases significantly.

This helps reinforce the ongoing downtrend.  If sellers can keep price below the formation, bearish continuation becomes all but inevitable.  Furthermore, it creates several decision zones that may become important resistance levels in the future.

Figuratively, separating lines indicate that the market may have chosen the low road.

How To Recognize Bearish Separating Lines Candlestick Patterns

Patterns are attractive partly because they stand out.

To the untrained eye, they may mean nothing.  But to those with experience, they are something like a beacon.  They draw your attention to a specific segment of price action, encouraging you to look more closely.

To gain this insight, all you need to do is learn the rules and practice finding them on the charts.

By definition, a bearish separating lines pattern has several requirements.

• It must appear during a general downtrend.
• The first candle must be a bullish long-line candlestick.
• The second candle must be a bearish long-line candlestick.
• The second candle must open at the bottom of the first candle’s body.
• The second candle must close below the first candle’s lower wick.

As you can see, most of this pattern’s rules center around the second candlestick.

However, some exceptions may be acceptable.

• The first candle doesn’t necessarily have to be a long candle, as long as it is not a short-line candle (ie. doji).
• The second candle doesn’t necessarily have to be a long candle as long as it is bearish and its other criteria are met.
• The second candle doesn’t necessarily have to open exactly in line with the open of the first candle, as long as it opens near it.
• The second candle doesn’t necessarily have to close below the lower wick of the first candle, as long it is a long bearish candle that closes below the body of the first candle.

You may find better results by stretching some of these criteria (or even adding your own).  For instance, your analysis may reveal that separating lines patterns made of two marubozu candles perform more reliably than those made of other candlestick types.  Or, you may find something else entirely.

Technically, these variations may fall more accurately under other candlestick continuation patterns.

This is okay though, as implication supersedes classification.  And similar patterns usually have similar implications (though not always).

Yet, that does not mean that these standards are wholly irrelevant.  In fact, certain ones are definitely mandatory, such as the direction of the candles and the approximately even opens.  It just means that deeper examination may help you identify more and/or better trading opportunities.

Ultimately, how seriously you take each of these guidelines is up to you.  Don’t forget that the purpose of analyzing candlestick patterns is to interpret underlying price action.  Your pattern labeling skills are less important.

To this end, you need to understand where they fit.

Where Bearish Separating Lines Fit in the Chart Narrative

The markets are often described as a battle between the bulls and the bears.

Bearish separating lines patterns show that the bulls tried to take control on candle one, lost the impetus between candles one and two, then relinquished command back to the bears by the end of candle two.

On the chart, it looks like a drawback preceding a bearish tsunami.

In the short-term, it amounts to a bullish counterpunch followed by a bearish knockout blow.

The question for traders:

“Will the downtrend continue immediately or can the bulls do anything to stem the tide?”

To answer that question, you’ll need more than an understanding of Japanese candlesticks and candlestick patterns.  You’ll want to evaluate both within the context of longer-term chart patterns as well as trend and price levels.  You’ll also want to make use of your own chart markup and indicators.

Explore the history of your preferred asset(s) with respect to separating lines candlestick patterns and apply your findings to your own trading style.

The more thorough your technical analysis, the more clear the story in the charts becomes.

How To Trade Bearish Separating Lines Candle Patterns

Bearish continuation points are great places to add to your short position or adjust your stop loss.

As such, bearish separating lines candle patterns serve as easy-to-spot signs of unchanging bearish momentum.  They may even lead to the next big leg down.

In most cases, you can assign greater weight to multi-stick patterns than single candles because they provide more information over a longer duration.  However, you should wait for all candles to close before making any decisions.  Otherwise, there is a good chance that you’ll get caught in a fake out.

Additionally, there are a few other things you should consider before trading candlestick patterns.

First and foremost, they are never a “sure thing.”  According to Bulkowski’s Encyclopedia of Candlestick Patterns, bearish separating lines have a hit rate of 63% (while bullish separating lines have a hit rate of 72%).  Sure, that is pretty decent but definitely not a certainty.

What’s more, candlestick patterns do not have uniform price targets or measured moves like chart patterns do.  That makes position management trickier.

Plus, failed continuation patterns often lead to reversal or consolidation.  Thus, you’d be wise to seek additional confirmation factors to increase your odds of a successful trade.

Some of these include:

• Volume – For continuation, you typically want to see reduced trading volume against the trend.  That means low volume on the first candle of a separating lines may be a good omen.
• Price Formations – Bearish continuation patterns tend to perform better when there is thin (or non-existent) support below them.  The further below and weaker the better.
• Matching Momentum – Oscillating indicators like the RSI or stochastics are commonly used to identify continuation by analyzing slope, percentile, and/or divergence.

The more corroborating elements are present, the more confident you can be about the strength of a bearish separating lines continuation signal.

Even so, it would be difficult to build a successful trading strategy around any single candlestick pattern.  There simply isn’t enough there to develop a strong edge.  It would still be suboptimal with an expert understanding of trading math, order execution, market psychology, risk management, options, and automation.

In essence, separating lines patterns are more useful idea givers than trade makers.

Better yet, you’ll probably find more success building your strategy around other tools and using candlestick patterns as the final point of confirmation.

Other Candlestick Pattern Types

There are many bearish continuation candlestick patterns.

The bearish separating lines is only one.

Likewise, there are many bullish continuation candlestick patterns.  Not to mention, you have bearish reversal candlestick patterns and bullish reversal candlestick patterns.

For most traders though, tackling all candlestick patterns at once may be the best learning path.

• Abandoned Baby – Bearish | Bullish
• Breakaway – Bearish | Bullish
• Counterattack Line – Bearish | Bullish
• Doji Star – Evening | Morning
• Engulfing – Bearish | Bullish
• Harami – Bearish | Bullish
• Harami Cross – Bearish | Bullish
• Hikkake – Bearish | Bullish
• In Neck – Bearish | Bullish
• Kicking – Down | Up
• Ladder – Top | Bottom
• Last Engulfing – Top | Bottom
• Long Day – Black | White
• Mat Hold – Bearish | Bullish
• Matching – High | Low
• Meeting Lines – Bearish | Bullish
• On Neck – Bearish | Bullish
• Star – Evening | Morning
• Stomach – Below | Above
• Tasuki Gap – Downside | Upside
• Three Inside – Down | Up
• Three Line Strike – Bearish | Bullish
• Three Methods – Falling | Rising
• Three Outside – Down | Up
• Tri-Star – Bearish | Bullish
• Tweezer – Top | Bottom
• Window – Falling | Rising

Sure, it is quite a long list.

Luckily for us all, you don’t need to memorize every pattern and its criteria.  Instead, focus on price action and technical analysis principles.  The goal is to be able to look at any group of candlesticks and understand what they mean.

The more candlestick patterns you study, the easier this will become.

Takeaways

To review:

Bearish separating lines are a type of candlestick pattern that signal a potential bearish continuation.  While not a guarantee, their appearance may indicate that sellers are primed to remain dominant.  When used properly, this can help you find winning trades.

Of course, there are other candlestick patterns that you should learn about.  Still, the ability to recognize patterns is not enough to trade successfully on its own.

Nonetheless, you’ve now added one more weapon to your trading arsenal.

Have questions or more information to add?  Contribute to the conversation in the comments below!  Or, if you know someone who could benefit from this post, share it with them.  You can also check out our Candlestick Patterns Guide to improve your candlestick analysis skills.