Counter Attack Candlestick Pattern: A Complete Guide to This Two-Bar Reversal Signal
The counter attack candlestick pattern is a two-bar reversal signal where the second candle opens with a gap in the trend direction but closes at the same level as the first candle close, indicating a loss of momentum. It has both a bearish version at the top of an uptrend and a bullish version at the bottom of a downtrend.
Key Takeaways
- The counter attack candlestick pattern is a two-bar reversal signal with bullish and bearish versions, defined by two candles of opposite color that close at the same price level.
- The pattern signals that the prevailing trend has stalled and a reversal or consolidation is possible, making it a moderate-reliability warning rather than a high-confidence trigger.
- Best reliability comes from daily and weekly timeframes where candle behavior is less noisy than on intraday charts.
- Always wait for the next candle to confirm the direction before entering a trade based on this pattern.
- Volume above the 20-day average on the second candle and an extreme RSI reading above 70 or below 30 strengthen the reversal case.
How to Spot the Counter Attack Pattern on Your Chart
The counter attack pattern appears as two candles that close at the same price level. In the bearish version, a long bullish candle gains ground during the first session. The next candle opens above that close with a gap, suggesting continued buying enthusiasm, but sellers push price back down to close at or near the first candle close. The result is two candles with bodies of opposite color that share a closing price line. In the bullish version, the setup is flipped. A long bearish candle loses ground. The next candle opens below that close with a gap down, but buyers step in and drive price back up to close at or near the first candle close. The closing prices match or nearly match in both versions. The closer the two closes align, the stronger the signal.
- Two candles with opposite colored bodies and matching close prices
- Bearish version: bullish candle followed by a bearish candle that gaps up then sells off
- Bullish version: bearish candle followed by a bullish candle that gaps down then rallies
- The gap at the open shows the trend tried to continue, then failed
- Pattern requires a preceding trend of at least 5 to 10 bars to be meaningful
What Does the Counter Attack Signal About Market Direction?
The counter attack pattern signals that the prevailing trend has lost momentum. The gap at the second candle open shows that traders expected the trend to continue, but the close at the same level as the prior session tells a different story. Whatever caused the gap was absorbed, and price rejected that move. I spotted a bearish counter attack on TSLA daily chart after a 15 percent rally over three weeks. The stock gapped up to 285.00 on the second candle but closed back at 272.50, right where the prior candle closed. That night session against the trend direction told me the buying pressure had exhausted. TSLA dropped 6 percent over the next four days. The signal carries more weight when volume on the second candle is above the 20-day average. High-volume rejection candles suggest institutional activity rather than retail noise. The bearish version warns of a potential top, while the bullish version warns of a potential bottom.
- The gap at open shows the trend tried to extend but failed
- The matching close price is the defining feature of this pattern
- TSLA example: gapped to 285.00 but closed at 272.50 matching the prior close
- Above-average volume on the second candle increases reliability
- Bearish version signals a potential top, bullish version signals a potential bottom
How to Confirm and Enter a Counter Attack Pattern Trade
The counter attack pattern is a warning signal, not an entry trigger. Confirmation is critical because the pattern can fail if the next candle reverses the counterattack signal. For a bearish counter attack, wait for the next candle to trade below the low of the second candle, then enter short. This confirms that sellers have fully taken control. For entry management, I place a stop loss above the high of the second candle, typically the gap-up open. For a bearish setup on NVDA, if the pattern high was 143.00 and entry is at 139.50, a stop at 144.00 keeps the risk contained. I target a 1:2 risk-reward ratio using the most recent support level as the first target. Checking the 14-period RSI adds context: a bearish counter attack with RSI above 70 has stronger reversal odds because the asset was overbought.
- Wait for the next candle to break below the pattern low before entering short
- Place stop loss above the high of the second candle, the gap-up open
- Target a 1:2 risk-reward ratio using the prior support level
- Combine with RSI above 70 for bearish setups or below 30 for bullish ones
- For bullish counter attack, wait for the next candle to close above the pattern high
Common Mistakes When Trading the Counter Attack Pattern
The most common mistake is treating the counter attack as a reliable reversal signal without confirmation. The pattern shows only that the trend stopped. It does not guarantee a reversal into the opposite direction. A sideways move for several days is equally possible. Without a confirming candle, the counter attack is just a pause. Another mistake is confusing the counter attack with the dark cloud cover or piercing patterns. The counter attack closes at the same level as the first candle, while dark cloud cover closes below the midpoint and piercing closes above the midpoint. These are distinct patterns with different strength profiles. I confused them early in my trading and took a short on what I thought was a dark cloud cover, but the close was actually at parity with the first candle, making it a counter attack. The next day gapped up and hit my stop. Traders also ignore the trend context. The counter attack must appear after a clear, measurable trend. Using it in a range-bound market produces random results.
- Do not trade the counter attack without confirmation from the next candle
- Do not confuse counter attack with dark cloud cover or piercing patterns
- The pattern requires a preceding trend, not a sideways market
- Counter attack signals a pause that may become a reversal or sideways consolidation
- Check volume: low volume on the second candle weakens the signal significantly
This page is for informational purposes only and does not constitute investment advice. Trading stocks, forex, and crypto carries substantial risk of loss. Past performance does not guarantee future results. Always consult a qualified financial advisor before making trading decisions.