Three White Soldiers and
Three Black Crows
These are some of the more powerful secondary signals. The reason they are considered secondary signals is because they don't occur as often as the major signals. However, it is always worthwhile knowing all the signals, even those that occur less often, because they can be used as supporting evidence of market trend and sentiment. In addition, secondary and other minor signals may offer opportunities that would otherwise be missed.
Three White Soldiers Pattern
In a downtrend three long white days occur with consecutively higher closes. Generally the Three White Soldiers signal suggests future market fortitude, as a reversal is in progress that is building on moderate upward steps.
Three White Soldiers is a three candle bullish reversal formation and is the opposite of Three Black Crows.
This pattern occurs in a downtrend where three consecutive white bodies occur in sequence, each with a higher close.
Each should open within the previous body and the close should be near the high of the day.
Rules:
- The downward trend has been fairly consistent for a good period of time.
- The first candle is in the opposite direction of the trend (a white candle).
- The second and third candlesticks are white and open in the previous day's body.
- Each day should close very near its high for the day.
- The opens should be within the top half of the previous day's body.
Signal Strengtheners:
- The longer the candles, the more dramatic the reversal.
- The higher a candle opens compared to the prior candle, the stronger the chance of a continued reversal.
General Analysis:
After a downtrend or a flat period, this pattern suggests an uptrend rally will occur. The strength of this formation consists of the fact that each day, the lower open suggests that the Bears are still present. By the end of each day, the Bulls have overcome the early period Bears. This indicates that a continued rally has selling occurring as it is happening. If there is large trade volume during this period, it is likely that positions are changing hands and a continued rise should be seen, especially in an oversold market.
Three Black Crows Pattern
In an uptrend three long black days occur with consecutively lower closes. Three Black Crows pattern suggests that the market has been at a high price for too long, and investors are beginning to compensate for it.
The Three Black Crows Signal is a three candle bearish reversal pattern and is the opposite of Three White Soldiers.
This pattern occurs in an uptrend where three consecutive black bodies occur in sequence, each with a lower close.
Each should open within the previous body and the close should be near the low of the day.
Rules:
- The upward trend has been fairly consistent for a good period of time.
- The first candle is in the opposite direction of the trend (a black candle).
- The second and third candlesticks are black and open in the previous day's body.
- Each day should close very near its low for the day.
- The opens should be within the bottom half of the previous day's body.
Signal Strengtheners:
- The longer the candles, the more dramatic the reversal.
- The lower a candle opens compared to the prior candle, the stronger the chance of a continued reversal.
General Analysis:
A long black candle forms after an uptrend. This uptrend has now reached levels where the Bears have started to short. The first long black candle body is followed by two more long black candles. Each having opened in the previous day's body, indicating that buying was occurring early each day but the Bears kept forcing prices down by the end of the day. This consistent process of selling provides a stronger downtrend potential versus a rapid overselling period. If there is large trade volume during this period, it is likely that positions are changing hands and a continued rise should be seen, especially in an oversold market.
There is a variation called Three Identical Crows where each of the opens are at the previous day's close instead of within the body. This variation shows more strength in that the selling is more severe. There do not appear to be any buyers at the next day's open. The long black candles, having a stair-stepping pattern to them, indicates a much greater motivation to get out of long positions.
