Chan Bi Down Complete Guide

What is Chan Bi Down?

The Chan Bi Down, technically recognized in Western technical analysis as the Bearish Breakaway, is a sophisticated five-bar bearish reversal pattern that typically appears at the climax of an uptrend. The pattern begins with a tall white (green) candle, followed by a second candle that gaps higher. The third and fourth candles are relatively small, continuing the upward trajectory but showing signs of diminishing momentum through smaller bodies or higher shadows. The final, fifth bar is a decisive long black (red) candle that plunges downward, closing within the gap created between the first and second days. This structure illustrates a 'wrapping' effect where the initial bullish enthusiasm is trapped and then overwhelmed by sudden selling pressure. According to Thomas Bulkowski’s 'Encyclopedia of Chart Patterns,' the Bearish Breakaway functions as a bearish reversal 63% of the time in bull markets. Steve Nison, who introduced Japanese candlesticks to the West, notes that the pattern's significance is heightened if the fifth day's volume is substantially higher than the preceding three days, indicating a mass exit of long positions. Historically, the pattern is considered rare but reliable, ranking 48th in overall performance among candlestick patterns. It signals that the 'overbought' condition has reached a breaking point, and the trend is likely to shift from bullish to bearish or enter a significant corrective phase. Traders often look for the fifth candle to close at least halfway into the first candle's real body to confirm the strength of the reversal.

Identification Rules

1. The market must be in a clear, established uptrend prior to the pattern.
2. Day 1 is a long white (green) candle; Day 2 is a candle that gaps up from Day 1.
3. Days 3 and 4 must be small-bodied candles that continue to make higher highs.
4. Day 5 is a long black (red) candle that closes inside the gap between Day 1 and Day 2.

References

• Thomas N. Bulkowski (2005). Encyclopedia of Chart Patterns.
• Steve Nison (2001). Japanese Candlestick Charting Techniques.

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