Unique Three River Bottom
The Japanese Candlesticks Unique Three River Bottom Pattern is an average 3 candlestick bullish reversal pattern occurring during a downtrend.
The Unique Three River Bottom is a bullish pattern, somewhat similar to the Morning Star Pattern.
Its first candlestick is a long black candlestick that is part of the downtrend.
The second day opens higher, drops down to a new low, then closes near the top of the trading range creating a Hammer-type candlestick.
The third day opens lower than the second, but above the low. It closes higher, but below the second days close, producing a white candle. The real white body shows that the market lost the selling pressure.
Unique Three River Bottom Trading Rules:
- The downward trend has been fairly consistent for a good period of time.
- The candlestick of the first day is a long black candlestick, consistent with the current trend.
- The second day does a black harami/hammer candlestick.
- The second day’s lower shadow has set a new low.
- The third day opens lower, but above the previous day low. It closes higher but below yesterday’s close producing a white body.
Signal Strengtheners:
- The longer the shadow of the second day, the probability of a successful reversal becomes greater.
- A confirmation on fourth day is suggested to show that that the downtrend has reversed. This may be in the form of a white candlestick, a large gap up or a higher close on the fourth day.
General Analysis and Investor Sentiment:
At the end of a strong downtrend, a long body black candle appears continuing current investor sentiment.
The next day prices open higher but Bearish investor sentiment is strong and the Bears are able to take prices down to new lows. But by the end of the day, the Bulls push it back up near to the top end of the trading range, but not above, still producing a black candlestick. This rally questions the strength by the Bears.
The third day, the Bears may try to take it down again, but the Bulls keep control producing a white candlestick. The increasing uncertainty of the Bears is further strengthened by this move changing investor sentiment.
If the following day sees prices continuing to go up, the trend has likely confirmed a unique three river bottom reversal.
