BULLISH THREE WHITE SOLDIERS
Definition
This pattern signals a strong market reversal. It features three normal or long candlesticks that incrementally move upward. Each day opens slightly lower than the previous day’s close, while prices progressively close at higher levels. This staircase-like behavior indicates a trend reversal.
Recognition Criteria
1. The market is currently defined by a dominant downward trend.
2. Three consecutive normal or long white candlesticks are observed.
3. Each candlestick opens within the body of the previous day.
4. Candlesticks progressively close at new highs, above the preceding day.
Pattern Requirements and Flexibility
The Bullish Three White Soldiers pattern features three consecutive normal or long white candlesticks. The last two candlesticks must open within the range of the preceding candlestick and close higher.
Trader’s Behavior
This pattern emerges when the market has been languishing at low prices for an extended period. The market continues to test new lows, signaling it is approaching or has reached a bottom. A decisive upward movement is then evident, marked by the appearance of the first white candlestick. The rally continues over the next two days, characterized by higher closes, forcing bears to cover their short positions.
Buy/Stop-Loss Levels
The confirmation level is set at the last closing price. For confirmation, prices need to surpass this level.
The stop-loss level is set at the last low. After a BUY signal, the stop-loss is triggered if prices decline instead of rising and either close below the stop-loss level or record two consecutive daily lows below it, without any bearish pattern being detected.