Three Stars In The South (3stsinsth)
Forecast: bullish reversal
Trend prior to the pattern: downtrend
The Three Stars in the South is a rare bullish reversal pattern consisting of three progressively smaller red bearish candlesticks. This pattern indicates that bearish momentum is weakening, giving bulls a chance to regain momentum.Some traders might mistake this pattern with the three black crows which are also made up of the three bearish candlesticks. However, the last one triggers the bearish reversal and occurs during the uptrend.While the 2nd and 3rd candlesticks of the three black crows open within the prior candlestick body and close lower than the prior candlestick body, the 3rd candlestick in the three stars in the south opens and closes within the 2nd candlestick.Construction1st• continuation of downtrend• long red body• long lower shadow and little or with no up shadow• represents strong bearish pressure in market2nd• continues downward momentum• red body smaller than 1st candlestick• open price below prior opening①• close price below or at prior closing②• low shadow is smaller and above prior low shadow③3rd• red body• marubozu candlestick (with no shadows)• candlestick body is engulfed by (covered by) 2nd candlestick body④• can be opened higher than 2nd candlestick in some casesThis pattern doesn't provide you with a predefined profit objective, so the exit strategy for a profitable trade is left to be determined by traders.Traders could use the pattern as a signal to exit a short position or to initiate a long position, when the price begins to increase (not trading advice).
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