Triple Candlestick Patterns


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Video Transcript:

Welcome to the second module of the advanced technical analogies course, candlestick formations. On this lesson we’re going to review triple candlestick formations. We’re going to start with a morning star and the evening star. We chart a very strong reversal patterns. Of course, to be able to use them, the market must be trending, because remember that these patterns occur at the end of up moves and down move. If the market is ranging or is choppy, you’re not going to be able to trade them profitably.

Morning Star candlestick pattern

Let’s start with the morning star. This pattern is found at the end of a down move at a support zone. Now, let’s go to the specifications of this formation. The first candlestick is large and bearish because it’s the last candle of the down move. Then we have a small body candle which denotes indecision at a support zone and then a large bullish candle denoting the takeover by the buyers of the support zone. So here is an example of the morning star.

You can see that we are in a clear down trend, then we have the last bearish candle. After that candle we have a small body candle. It can be a doji, but not necessarily a doji. A small body candle will do. Then when you have a bullish candle after the indecision candle, it denotes the takeover of this level of support by the buyers, so after this candle closes, the morning star is complete and you can go long on the asset.

The evening star is a counterpart of the morning star. This pattern is found at the end of an up move at a resistance area. The first candlestick is large and bullish which is the last candlestick of the up move. Then we have a small body candle indicating indecision and then a small bearish candle indicating a reversal and a bear takeover.

Here we have an example of the pattern. You can see that we are in a clear up move and here we have the last bull candle of the up move. Then we have what looks like to be a small body hammer. Remember, it doesn’t have to be a doji. It just has to be a candle that denotes indecision.

In this case, we do have indecision, because we have a small body candle with a long down wick. Then we have a bearish candle which denotes the takeover of the bearish and of this resistance zone. The buyers could not push above the zone. The up move ended and we are now in a bear move. So after this candle closes you can go short on the asset.

Let’s have a look at three inside up and three inside down. These candlestick formations are trend reversal signals. Let’s start with the three inside up. This pattern is found at the end of an up move. Let’s go through the specification of this pattern.

Inside Up and Inside Down Pattern

The first candlestick should be bearish and at the end of the move. The second candlestick must be bullish and get to at least the middle point of the first candlestick. The third candlestick must close above the first candle’s high to confirm the reversal. So here is an example of the pattern.

As you can see, we are here in a down move, then we have the first candle of the pattern at a support zone, a bearish candle. Then the second candle of the pattern is this bullish candle that closes above the middle point of this bearish candle. The third candle, which is this one that closes above this candle’s high ends with a pattern. After we see this pattern at a support zone, we can go long on the instrument we are analyzing, because we have a three inside up pattern.

Let’s have a look at three inside down. This pattern is found at the end of an up move. The first candlestick should be bullish and at the end of a move. The second candlestick must be bearish and get to at least the middle point of the first candlestick. The third candlestick must close below the first candlestick’s low to confirm the reversal. Let’s have a look at an example.

As you can see here, we are in a strong up trend. This is the first candle of the pattern, the last candle of the bullish move at a resistance area. Then we have the second candle of the pattern which is the first bearish candle that closes below the midpoint of this bullish candle. Then the third candle of the pattern is the second bullish candle that closes below this candle’s low, to confirm that we have now a three inside down at a resistance zone. So we can go short on the asset we are analyzing.

Finally, three soldiers and three crows. These two patterns are a confirmation of a reversal after an indecision period. These work better at the strong support and resistance zones. For these patterns to work, the second candle’s body should be bigger than the first and the first candle’s body should be the same size approximately as the second one.

Let’s have a look at three white soldiers. This pattern is found at a support zone and at the end of a move. The pattern is formed when three bullish candles follow a down trend, reversal at a support. The second candle should close near its high, leaving a very small upper wick, which denotes a bull strength. If it’s a more marubozu candle, it’s even better. Here is an example of a three white soldiers.

Three Soldiers and Three Crows

You can see that after this strong move down, we have an indecision period of three candles. Then we have the first bullish candle. We have a second bullish candle which body is bigger than the first candle’s body and closes near its high. The third candle is approximately the same size of the second candle and now we have a confirmation of a reversal, and we can go long on this asset, putting our stops below the lows.

The three black crows is the counterpart of the three white soldiers. This pattern is found at a resistance zone at the end of an up move. The pattern is formed when three bearish candles follow an up trend and at a resistance area we have indecision. The second candle should close near its lows, leaving a very small lower wick which denotes bear strength.

Again, if we have a marubozu candle, it’s even better. Remember that a marubozu candle is a candle with no wicks. Here we have an up trend and an indecision zone, then we have the first candle of the three black crows. Then we have the second candle which is bigger than the first and closes the period slow. The third candle, which is approximately the same size of the second candle, closes with the pattern so we have a reversal in play and now we can short this asset.

So these are the triple candlestick formations and remember that because we have three candlesticks that play into the formation of these patterns, they are stronger reversal patterns that are double or the single candlesticks.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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