Detecting Bearish Deliberation Candlestick Pattern in Pine Script

Overview of Bearish Deliberation Candlestick Pattern

The Bearish Deliberation candlestick pattern is a technical analysis formation that signals a potential bearish reversal in an uptrending market. This pattern is particularly relevant for traders and analysts who rely on candlestick charting to make informed decisions about market movements. Understanding the Bearish Deliberation pattern can help in predicting a shift from bullish to bearish sentiment, often leading to a sell-off or a downward price movement.

Structure of the Bearish Deliberation Pattern

The Bearish Deliberation pattern typically consists of three candles:

1. First Candle: A long white (or green) candle that continues the existing bullish trend. This candle indicates strong buying pressure and is usually part of a sustained uptrend.
2. Second Candle: Another white (or green) candle, similar in size to the first, which opens higher than the previous close and also closes higher. This candle suggests that the bullish trend is continuing, but it’s crucial to note that the absence of a significant upper shadow can indicate that buyers are starting to lose their grip on the market.
3. Third Candle: A small or Doji candle that opens at or near the close of the second candle. This candle is critical as it reflects uncertainty and a significant reduction in buying momentum. The small body and potentially long upper shadow indicate that buyers are struggling to push the price higher, and a reversal might be imminent.

Importance in Technical Analysis

In technical analysis, candlestick patterns like the Bearish Deliberation pattern hold significant importance due to their ability to provide insights into market psychology and potential future price movements. Here are some key reasons why such patterns are important in technical analysis:

1. Market Sentiment Indicators: Candlestick patterns are a direct reflection of market sentiment. They represent the collective emotions and decisions of traders and investors, whether it’s optimism, pessimism, uncertainty, or indecision. By interpreting these patterns, analysts can gauge the prevailing sentiment and anticipate possible market directions.
2. Predictive Value: While not foolproof, candlestick patterns offer predictive insights into potential future market movements. For instance, a Bearish Deliberation pattern suggests that bullish momentum may be waning, and a bearish reversal could be imminent. Traders use this information to position themselves accordingly.
3. Entry and Exit Signals: Candlestick patterns can provide entry and exit signals for traders. For example, the appearance of a Bearish Deliberation pattern in an uptrend might be used as a signal to exit long positions or even to enter short positions, anticipating a downward price movement.

Example From Trading View

Defining the Bearish Deliberation Candlestick Pattern Criteria

The Bearish Deliberation candlestick pattern is a bearish reversal indicator that typically appears at the end of an uptrend. Its key criteria are:

1. Uptrend Context: Occurs during a clear uptrend.
2. First Candle: A long white (or green) candle, indicating strong buying.
3. Second Candle: Another long white (or green) candle, opening higher than the first candle’s close, but with little or no upper shadow, suggesting weakening bullish momentum.
4. Third Candle: A small-bodied candle (which can be white, green, or even black/red) that opens at or near the close of the second candle, signaling a significant loss of bullish strength.

Code For Detecting Bearish Deliberation

//@version=5
indicator("Bearish Deliberation Pattern", shorttitle="BDP", overlay=true)

// Function to check if the candle is bullish with a long real body
isBullishLongBody(candle) =>
    bodySize = math.abs(close[candle] - open[candle])
    bodySize > (high[candle] - low[candle]) * 0.6 and close[candle] > open[candle]

// Detecting uptrend
uptrend = close > ta.sma(close, 20)

// Criteria for the candles
firstCandleBullish = isBullishLongBody(2)
secondCandleBullish = isBullishLongBody(1) and close[1] > close[2]
thirdCandleSmallBody = math.abs(close - open) < (high - low) * 0.3
thirdCandleGapUp = open > close[1]

// Detecting the pattern
bearishDeliberationPattern = uptrend and firstCandleBullish and secondCandleBullish and thirdCandleSmallBody and thirdCandleGapUp

// Plotting using label
if bearishDeliberationPattern
    label.new(bar_index[2], high[2], "Bearish Deliberation", color=color.red, textcolor=color.white, style=label.style_label_down, yloc=yloc.abovebar)

Output

Overview of the script 

1. Indicator Declaration

//@version=5
indicator("Bearish Deliberation Pattern", shorttitle="BDP", overlay=true)

• //@version=5: Specifies that the script uses version 5 of Pine Script.
• indicator(...): Declares a new indicator named “Bearish Deliberation Pattern” with a short title “BDP”. The overlay=true parameter means that the indicator will be plotted directly on the price chart.

2. Function to Check Bullish Candle with Long Body

isBullishLongBody(candle) =>
    bodySize = math.abs(close[candle] - open[candle])
    bodySize > (high[candle] - low[candle]) * 0.6 and close[candle] > open[candle]

• This function, isBullishLongBody, determines if a specified candle (candle) is bullish with a long real body. It calculates the absolute size of the candle’s body and checks if it’s greater than 60% of the candle’s total range (high - low). A candle is considered bullish if its closing price is higher than its opening price.

3. Detecting Uptrend

uptrend = close > ta.sma(close, 20)

• This line defines an uptrend condition. It checks if the current closing price is above the 20-period Simple Moving Average (SMA) of the closing prices. This is a common way to gauge the general trend direction.

4. Criteria for the Candles

firstCandleBullish = isBullishLongBody(2)
secondCandleBullish = isBullishLongBody(1) and close[1] > close[2]
thirdCandleSmallBody = math.abs(close - open) < (high - low) * 0.3
thirdCandleGapUp = open > close[1]

• firstCandleBullish: Checks if the candle two periods ago was a bullish candle with a long body.
• secondCandleBullish: Checks if the previous candle was bullish with a long body and closed higher than the candle before it.
• thirdCandleSmallBody: Checks if the current candle has a small body (less than 30% of its total range).
• thirdCandleGapUp: Checks if the current candle opened higher than the close of the previous candle.

5. Detecting the Pattern

bearishDeliberationPattern = uptrend and firstCandleBullish and secondCandleBullish and thirdCandleSmallBody and thirdCandleGapUp

• This line combines all the previously defined conditions to identify the Bearish Deliberation pattern.

6. Plotting the Pattern

if bearishDeliberationPattern
    label.new(bar_index[2], high[2], "Bearish Deliberation", color=color.red, textcolor=color.white, style=label.style_label_down, yloc=yloc.abovebar)

This conditional statement checks if the Bearish Deliberation pattern is detected. If so, it plots a label on the chart.

Frequently Asked Questions

Conclusion

This script is designed to detect the Bearish Deliberation candlestick pattern, a key indicator for potential bearish reversals in an uptrending market. It effectively identifies this pattern by analyzing the size and formation of the latest three candles about the ongoing trend. The script’s features include checking for a preceding uptrend using a Simple Moving Average (SMA), identifying two consecutive long bullish candles, and then spotting a smaller-bodied candle that signals a weakening of the bullish momentum. While the script marks the occurrence of this pattern, it does not provide trade confirmations, leaving room for traders to apply additional analysis for confirmation. Its versatility across different time frames makes it a useful tool for various trading strategies, but like all technical indicators, it should be used in conjunction with other analysis methods for optimal results.