Unique 3 River candlestick pattern

In theory, the Unique Three River candlestick pattern is a reversal pattern that signals a potential change in the direction of the prevailing trend (from bearish to bullish). However, this pattern in some cases might also signal the bearish continuation stating that buyers’ attempts to push the prices can fail. A rarely occurred pattern.

The 1st long red candlestick reflects the strong bearish pressure, while the 2nd candlestick reflects the market indecision as buyers come in and resist sellers, resulting in a very short red body.

Construction

1st

• part of downtrend
• long red body

2nd

• hammer candle
• shorter red body than 1st candlestick body
• engulfed by (within) 1st candlestick body
• bottom shadow at least twice longer than its body
• bottom shadow below 1st candlestick bottom shadow① setting new low^①

3rd

• green candle
• close price below close price of 2nd candle^②
• bottom shadow below 2nd candlestick bottom shadow^③

The confirmation should be the following 4th candlesticks. It allows us to determine whether a bearish continuation (red candle) or a bullish reversal (green candle with an upward breakout or higher closing price) will occur.

Traders can place a stop loss order below the low of the 2nd candlestick.