Evening and Morning Stars
The morning star and the evening star are triple candlestick
patterns that you can usually find at the end of a trend. They are reversal
patterns that can be recognized through these three characteristics:
1. The first
stick is a bullish candle, which is part of a recent uptrend.
2. The
second candle has a small body, indicating that there could be some indecision
in the market. This candle can be either bullish or bearish.
3. The third
candle acts as a confirmation that a reversal is in place, as the candle closes
beyond the midpoint of the first candle.
Three White Soldiers and Black Crows
The three white
soldiers pattern is formed when three long bullish candles follow a
downtrend, signaling a reversal has occurred. This type of candlestick pattern
is considered as one of the most potent in-yo-face bullish signals, especially
when it occurs after an extended downtrend and a short period of consolidation.
The first
of the three soldiers is called the reversal candle. It either ends the
downtrend or implies that the period of consolidation that followed the
downtrend is over.
For the
pattern to be considered valid, the second candle should be bigger than the
previous candle's body. Also, the second candle should close near its high,
leaving a small or non-existent upper wick.
For the
three white soldiers pattern to be completed, the last candle should be at
least the same size as the second candle and have a small or no shadow.
The three black crows candlestick
pattern is just the opposite of the three white soldiers. It is formed when
three bearish candles follow a strong uptrend, indicating that a reversal is in
the works.
The
second candle's body should be bigger than the first candle and should close at
or very near its low. Finally, the third candle should be the same size or
larger than the second candle's body with a very short or no lower shadow.
Three Inside Up and Down
The three inside up candlestick
formation is a trend-reversal pattern that is found at the bottom of a
downtrend. It indicates that the downtrend is possibly over and that a new
uptrend has started. For a valid three inside up candlestick formation, look
for these properties:
1. The first
candle should be found at the bottom of a downtrend and is characterized by a
long bearish candlestick.
2. The
second candle should at least make it up all the way up to the midpoint of the
first candle.
3. The third
candle needs to close above the first candle's high to confirm that buyers have
overpowered the strength of the downtrend.
Conversely, the three inside down candlestick
formation is found at the top of an uptrend. It means that the uptrend is
possibly over and that a new downtrend has started. A three inside down candle
stick formation needs have the following characteristics:
1. The first
candle should be found at the top of an uptrend and is characterized by a long
bullish candlestick.
2. The
second candle should make it up all the way down the midpoint of the first
candle.
3. The third
candle needs to close below the first candle's low to confirm that sellers have
overpowered the strength of the uptrend.
