Understanding the Breakaway

What is the Breakaway?

The Breakaway is a significant candlestick pattern that signifies a strong shift in market sentiment. It typically occurs at the beginning of a new trend, either bullish or bearish, and involves a series of candles that break away from the previous trend's range. The pattern includes a sequence of candlesticks that confirms a breakout and sets the stage for a new trend.

How is the Breakaway Identified?

The Breakaway pattern is identified by:

1. Pattern Formation:
   • Bullish Breakaway: Consists of a series of candles that form a breakout from a consolidation or downtrend, leading to a new uptrend.
   • Bearish Breakaway: Consists of a series of candles that form a breakout from a consolidation or uptrend, leading to a new downtrend.

When to Use the Breakaway

The Breakaway pattern is useful for:

• Trend Reversal Signals: When it appears after a consolidation phase or at the end of an existing trend, it may indicate the start of a new trend.
• Confirmation: Look for confirmation from additional indicators or subsequent candles to validate the breakout.

Formula Example

To identify the Breakaway:

1. Identify the Series of Candles:
   • Bullish Breakaway: The candles should exhibit a strong bullish breakout from the previous consolidation or downtrend.
     • Condition: The first candle in the pattern should break above the high of the previous consolidation or downtrend. Subsequent candles should confirm the continuation of the uptrend.
   • Bearish Breakaway: The candles should exhibit a strong bearish breakout from the previous consolidation or uptrend.
     • Condition: The first candle in the pattern should break below the low of the previous consolidation or uptrend. Subsequent candles should confirm the continuation of the downtrend.

For instance, a bullish Breakaway pattern may look like:

• Previous Consolidation: High = 100, Low = 95
• First Candle: Opens above 100 and closes higher, confirming a breakout.
• Subsequent Candles: Continue to show bullish behavior, validating the new uptrend.

Parameters

The parameters for identifying the Breakaway pattern include:

• Data: Defines the type of data to use for the pattern.

  • Value: ohlc
  • Description: The pattern uses Open, High, Low, and Close prices.

• Previous N Candles: Number of preceding candles to check.

  • Default Value: 1
  • Min Value: 1
  • Max Value: 300
  • Description: Checks for the Breakaway pattern in the last N candles.

• Pattern Type: Specifies whether the pattern is bullish or bearish.

  • Default Value: :bullish
  • Options: :bullish, :bearish
  • Description: Determines the type of breakout pattern to identify (bullish or bearish).

Conclusion

The Breakaway candlestick pattern signals a significant shift in market sentiment, indicating the potential start of a new trend. It is crucial to use this pattern in conjunction with other technical indicators to confirm the breakout and trend reversal.