Detecting Advance Block Candlestick Pattern in Pine Script

Overview of Advance Block Candlestick Pattern

The Advance Block Candlestick Pattern is a bearish reversal pattern that typically appears in an uptrend, suggesting a potential weakening of the bullish momentum. Here’s an overview of its key characteristics:

1. Formation and Structure:
   • The pattern consists of three consecutive white (or green) candles, each closing higher than the previous one.
   • Despite the upward trend, each candle in the sequence shows a progressively smaller real body, indicating a loss of bullish strength.

Importance in Technical Analysis

The Advance Block Candlestick Pattern holds significant importance in technical analysis for several reasons:

1. Early Warning Signal: It serves as an early warning of a potential bearish reversal in an uptrend, helping traders to anticipate and prepare for a change in market direction.
2. Insight into Market Psychology: The pattern reflects a gradual shift in market sentiment from bullish to bearish, as indicated by the progressively smaller real bodies and longer upper shadows of the candles. This insight into buyer and seller dynamics can be crucial for decision-making.
3. Enhancing Trading Strategies: The Advance Block pattern can be a valuable addition to a trader’s strategy, particularly for identifying potential tops or for taking profit on long positions before a reversal occurs.
4. Confirmation of Trend Weakness: When this pattern appears in an uptrend, it suggests that the bullish momentum is weakening, which can be a critical piece of information for traders focusing on trend-following strategies.
5. Risk Management: Recognizing the pattern can aid in risk management, allowing traders to adjust stop-loss orders or reduce positions to protect profits in anticipation of a potential trend reversal.

Example From Trading View

Defining the Advance Block Candlestick Pattern Criteria

The Advance Block Candlestick Pattern is defined by specific criteria that signal a potential bearish reversal within an uptrend. Here are the key criteria that characterize this pattern:

1. Three-Candle Formation:
   • The pattern consists of three consecutive white (bullish) candles.
2. Trend Context:
   • It typically appears within an established uptrend.
3. Candle Color and Closing Prices:
   • Each candle in the sequence should have a white (bullish) real body, indicating that the closing price is higher than the opening price.
   • The closing price of each candle should be higher than the previous candle, reflecting the ongoing uptrend.

Code For Detecting Advance Block

//@version=5
indicator("Advance Block Candlestick Pattern", shorttitle="ABCP", overlay=true)

// Function to check if a candle is a white (up) candle
isWhiteCandle(close, open) =>
    close > open

// Function to calculate the upper shadow
upperShadow(high, close, open) =>
    high - math.max(close, open)

// Criteria for Advance Block
firstCandleWhite = isWhiteCandle(close[2], open[2])
secondCandleWhite = isWhiteCandle(close[1], open[1])
thirdCandleWhite = isWhiteCandle(close, open)

smallerBodySecond = (close[1] - open[1]) < (close[2] - open[2])
smallerBodyThird = (close - open) < (close[1] - open[1])

higherCloseSecond = close[1] > close[2]
higherCloseThird = close > close[1]

increasingUpperShadows = upperShadow(high[2], close[2], open[2]) < upperShadow(high[1], close[1], open[1]) and upperShadow(high[1], close[1], open[1]) < upperShadow(high, close, open)

// Detecting the pattern
advanceBlockPattern = firstCandleWhite and secondCandleWhite and thirdCandleWhite and smallerBodySecond and smallerBodyThird and higherCloseSecond and higherCloseThird and increasingUpperShadows

// Plotting the label
if advanceBlockPattern
    label.new(bar_index, high, "Advance Block\nPattern", color=color.rgb(0, 255, 8),yloc = yloc.abovebar)

Output

Overview of the script 

1. Script Declaration

//@version=5
indicator("Advance Block Candlestick Pattern", shorttitle="ABCP", overlay=true)

• //@version=5: Specifies that the script uses Pine Script version 5.
• indicator(...): Declares a new indicator named “Advance Block Candlestick Pattern” with a short title “ABCP”. The overlay=true parameter indicates that this indicator will be plotted directly on the price chart.

2. Function Definitions

isWhiteCandle(close, open) =>
    close > open

upperShadow(high, close, open) =>
    high - math.max(close, open)

• isWhiteCandle: A function to determine if a candle is white (bullish), which is true when the closing price is higher than the opening price.
• upperShadow: A function to calculate the upper shadow (wick) of a candle, which is the difference between the high and the higher of the close or open.

3. Criteria for Advance Block

firstCandleWhite = isWhiteCandle(close[2], open[2])
secondCandleWhite = isWhiteCandle(close[1], open[1])
thirdCandleWhite = isWhiteCandle(close, open)

• These lines check if the first, second, and third candles are white (bullish).

4. Pattern Characteristics

smallerBodySecond = (close[1] - open[1]) < (close[2] - open[2])
smallerBodyThird = (close - open) < (close[1] - open[1])
higherCloseSecond = close[1] > close[2]
higherCloseThird = close > close[1]
increasingUpperShadows = upperShadow(high[2], close[2], open[2]) < upperShadow(high[1], close[1], open[1]) and upperShadow(high[1], close[1], open[1]) < upperShadow(high, close, open)

• These lines define the specific characteristics of the Advance Block pattern: each successive candle has a smaller body than the previous one, closes higher than the previous one, and has an increasing upper shadow.

5. Detecting the Pattern

advanceBlockPattern = firstCandleWhite and secondCandleWhite and thirdCandleWhite and smallerBodySecond and smallerBodyThird and higherCloseSecond and higherCloseThird and increasingUpperShadows

• This line combines all the conditions to identify the advanced block pattern.

6. Plotting the Label

if advanceBlockPattern
    label.new(bar_index, high, "Advance Block\nPattern", color=color.rgb(0, 255, 8),yloc = yloc.abovebar)

• This conditional statement checks if the advanceBlockPattern condition is true.
• label.new(...): If the pattern is detected, this function plots a label on the chart at the high of the current bar, with the text “Advance Block\nPattern” in green color.

Frequently Asked Questions

Conclusion

This script is designed for detecting the Advance Block Candlestick Pattern, a crucial indicator in technical analysis for identifying potential bearish reversals in uptrends. It efficiently automates the recognition of this pattern, characterized by three consecutive white candles with diminishing sizes and increasing upper shadows. The script aids traders in timely identifying these patterns, providing a valuable tool for enhancing market analysis and decision-making in trading strategies. Its integration into trading platforms offers a streamlined approach to spotting key trend reversal signals.