Separating Lines Candlestick Pattern: Rules, Examples and Tested Results

The separating lines candlestick pattern is a two-candle continuation pattern. In a trend, one candle moves against it, then the next one opens at the same opening price and moves away in the direction of the trend. The two candles separate from a common open, hence the name. We tested it on full price history: 240 bullish and 148 bearish occurrences on daily charts, compared with random days on the same assets. This guide gives the definition, the rules, the techniques traders use and what the data says.

What is the separating lines pattern?

Separating lines signal trend continuation, not trend reversals. One version forms in an uptrend and is bullish, the other in a downward trend and is bearish. In both, the first candle looks like the start of a pullback, and the next one cancels it in a single session by starting where the first one started and moving the other way. The setup consists of two candles of opposite colors with the same open, and it is subtler to read than it looks.

How to identify the pattern

Bullish separating lines structure

• An uptrend before the setup.
• A black (red) candle is followed, at the opening of the next session, by a large white (green) candle.
• Its opening price equals the open of the black one and sits at or very near its low (our bench allows a lower shadow of up to a tenth of the average candle range), and it closes higher.

Bearish separating lines structure

• A downtrend before the setup.
• A white candle followed by a long black candle that opens at the open of the white one, at or very near its high (our bench allows an upper shadow of up to a tenth of the average candle range), and closes lower.

These charts are not drawn by hand: each one is the median shape of the clean occurrences our bench detected, with the levels of the trading setup we test.

The psychology behind the pattern

In the uptrend case, the red candle shows sellers winning a session. The next morning, the stock does not start at the previous day's closing price: it jumps back to the previous open, and buyers push it higher all day. The pullback is erased. The downtrend case, the bearish separating lines, is the mirror: in the textbook case, the trend continued after one day of resistance. That is the textbook reading; whether it predicts the next move is a question for the data below.

Key characteristics and formation rules

Three conditions decide whether the setup is valid. First, the second candle starts at the same price as the first, not at the previous day's closing price: that gap is what gives the formation its meaning. Next, it starts at or very near its extreme, with a very short shadow on that side or none, like a belt hold. Third, it is large compared with recent sessions.

This has a consequence for crypto and forex trading. In a market that trades without a break, each candle starts almost exactly at the previous candle's closing price, so the two opening prices can only match if the first candle has almost no body (open near the closing price). Our bench still finds the setup there, as would trading tools that use the same rules, but only about once every 489,378 hourly bars for the bearish version on crypto, and once every 978,757 hourly bars for the bullish one on crypto: its rule also asks the first candle for a real body, at least the average of the 10 prior candles, which rarely fits a second candle that starts back at the first open. On hourly forex charts it found neither version.

How to trade this type of setup

Setting entry points and stop-loss levels

Defining profit targets

Our bench sets the target at twice the risk; the next support or resistance level is an alternative we did not test. In our data, winning bullish positions on daily charts took a median of 18 days to reach the 2:1 target, and losing ones were stopped out after a median of 8 days.

Combining with technical indicators

A trend filter such as the 200-day moving average, or a momentum indicator such as the RSI or MACD, can be added as confirmation before taking the signal. We tested the moving average filter (next section). We have not tested RSI or MACD filters.

Important factors influencing pattern strength

The market context seemed to change the results, on small samples. On daily stock charts, long setups below the 200-day average reached the 2:1 target in 46.9% of 32 trades (expectancy +0.36 R), against 41.5% above it (+0.26 R). Bearish setups did worse above the average (20.8% of targets hit, on only 24 trades, below our floor of 30) than below it (24.7%). These results are descriptive and not corrected for the number of tests we run. Among the other factors, high volume (above 1.5 times the average) did not help: 32.7% of long targets hit, against 45.6% with normal activity.

Common mistakes when trading separating lines

• Accepting a second candle that starts at the previous close when the first candle has a real body: without the jump back to the first open, it is not the setup. In crypto and forex, the previous close can only match the first open when the first body is almost empty, as explained above.
• Ignoring market conditions: without a trend there is nothing to continue.
• Treating it as a strong trading signal. In our tests it did not beat chance by a measurable margin.
• Reading the crypto version like the stock market version, where the open can differ from the previous close.

Separating lines vs engulfing pattern: key differences

Both candlestick patterns use two candles of opposite colors, but they say different things. In an engulfing pattern, the second body covers the first one and the signal is read as a reversal. Here, the bodies do not overlap: they start from the same price and move apart, and the signal is read as continuation. On daily charts, the bullish engulfing reached its 2:1 target 36.9% of the time against 35.7% on random dates; the bullish setup studied here, 42.0% against 37.8%.

Pros and cons of using this continuation pattern

• Pro: clear rules, with a defined stop on the other side of the setup, so a trader can quickly apply it.
• Pro: the bullish version was found on every market we tested except forex, about once every 32,449 sessions on daily charts in an uptrend, with rates of the same order on stock (36,056) and commodity (19,156) charts.
• Con: no clear edge over random entries in any market with enough data, and our strict rule leaves several rows (weekly charts, commodities) with too few cases to read at all. On candle shape alone, at TA-Lib's own long-body threshold, it finds about 7% of the bullish and 4% of the bearish occurrences of the open-source TA-Lib library, so a scanner will show far more setups.

How reliable is the separating lines pattern?

Each rate is the share of trades that reached the target. Compare it with the one in parentheses: the same entry, stop and target on random dates of the same assets. On daily charts, 56.5% of uptrend cases were higher 10 days later, against 54.7% of random days. The trade in an uptrend had an expectancy of +0.26 R per trade before costs, against +0.15 R at random; the short one had an expectancy of −0.24 R, against −0.14 R for a random short, a gap within noise. Every row with at least thirty trades shows no measurable difference from chance, on the 10-bar move as on the 2:1 trade. Both hourly crypto rows and both weekly rows have fewer than thirty trades: their rates are shown, but they are too few to be read either way. Hourly forex produced no case of either version; commodity data produced only 4 bullish daily cases and no bearish ones: our bench draws no conclusion there.

Cases from our test bench

The gallery in the Real examples section shows real separating lines, picked by our bench (best and worst results, textbook shapes, most recent, random draws), with their actual outcome. The cases written up here are on daily US stock charts.

• Target reached. On December 20, 2021, AFL printed a black candle (50.31 to 49.72); on December 21 the next one started at 50.33, back at the first open within our tolerance, and closed at 51.05. The buy stop at 51.53 was triggered on December 22, with a stop at 49.09, and the 2:1 target at 56.42 was reached on January 10, 2022.
• Stopped out. On August 22, 1994, Citigroup (C) printed a black candle from 27.54 to 27.34; on August 23 the next one started at 27.54, back at the first open, and closed at 28.24. The stock opened at 28.64 on August 24, above the buy stop, so the entry filled at that open, with a stop at 27.24. Price rose to 29.64 on August 30, about 0.7 R in profit, then fell back to the stop on September 19: a 1 R loss.
• Canceled. On September 29, 2022, AMD started at 67.15 and fell to 64.14 to close the session, a short setup. Three sessions later, price traded above the top of the setup at 68.80 before breaking its low, yet AMD was 8.1% lower 10 days later.

In all three cases the second candle jumps back to the first open instead of starting at the previous close, the gap that stock charts allow.

FAQ

Summary

• Two candlestick bodies of opposite colors that start at the same price and move apart, with the prevailing direction.
• In an uptrend: 42.0% of 2:1 targets hit on 240 daily cases (212 closed trades), against 37.8% on random dates, a gap within noise.
• In crypto and forex each candle opens almost exactly at the prior close, so a first candle with a real body rarely fits and the setup is rare.

About the author and the data. Written by Amaury, founder of PatternsWizard, who is passionate about finance, quantitative trading and data analysis. He built the PatternsWizard test bench, which detects each setup with fixed, published rules on full market history: crypto, forex, US stocks, ETFs, indices and commodities. Trades and win rates are compared with random bars on the same assets, excess returns with the rest of the market, with error margins and a correction for multiple testing, and the whole pipeline is checked on random-walk prices, where nothing can be predicted. Statistics on this page were generated on November 5, 2026. The full methodology explains every step. Disclaimer: this page is educational information, not investment advice.