Three Stars in the South |
Characteristic of Candlesticks: Reversal
Relevance of Candlesticks: Bullish
Prior Trend of Candlesticks: Bearish
Reliability of Candlesticks : 4th Grade
Confirmation of Candlesticks: Rare
Candlestick Patterns Key Reference |
DESCRIPTION
Three Stars in the South is a bullish reversal pattern.
Three Stars in the South pattern is identifed when we see three consecutive bearish candlesticks during a downtrend.
Each candlesticks is consecutively weaker in a bearish trend and possibly some buying may occur.
Each day low is getting higher suggest that the trend is reversing to a bullish direction.
PATTERN RECOGNITION
1. The Three Stars in the South pattern is identified by a downtrend.
2. Firstly we will see a bearish opening marubozu candlestick with a lower shadow like a hammer.
3. Then we will see a bearish opening marubozu candlestick with smaller body and the low above the first bearish marubozu candlestick.
4. Then we see the trend continues downward but retraces up and close at the higher end of the range, forming a hammer. (The longer the shadow, the better the reversal will happen).
5. Finally we see a small bearish marubozu candlestick that lies within the shadow range of the first candlestick.
EXPLAINATION
The Three Stars in the South pattern indicate a declining downtrend by lesser and lesser daily price movement and consecutively higher lows.
The buying interest is causes by the first candlestick long lower shadow. The next candlestick open at higher level, trades lower, but not lower than previous day low.
Then we see a small bearish marubozu candlestick which is engulfed by previous candlestick range.
Higher low caused uneasyness among sellers and the last small bearish candlestick indicate market indecision with hardly any movement. Sellers are now ready to close their short position if they observe any upside movement.
The 4th grade reversal patterns are rare reversal patterns that may require confirmation in the next session.
POINT TO NOTE
A confirmation on the fourth bullish candlestick is required with a large gap upward or a higher close to ensure the reversal of trend.
CANDLESTICK PATTERNS KEY REFERENCE
Irrespective of Color (Can be bullish or bearish) |
Uptrend |
Consolidation |
Downtrend |
ANTICIPATED DIRECTION OF TREND
Lighter Arrow = Lower Probability
Solid Arrow = Higher Probability
More Likely to go sideway, Less likely to rally
|
More likely to rally, Less likely to go sideways
|
More likely to go sideway, Less likely to fall
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More likely to fall, Less likely to go sideways |
