three white soldiers candlestick pattern
Three White Soldiers Candlestick Pattern: In the field of stock market analysis, technical analysts utilize charts and candlestick patterns to evaluate stock prices and predict future trends. Each pattern contains valuable information that provides insight into market direction.
By analyzing and interpreting these patterns, analysts can make informed predictions about the future movements of stocks, allowing investors to make informed investment decisions.
In this article, I will explain a candlestick pattern called the Three Hundreds candlestick pattern.
Three White Soldiers Candlestick Pattern – Definition
The Three White Soldiers candlestick pattern is a bullish candlestick pattern that generally indicates a bullish trend. bullish reversal. This means that the stock price is likely to trend upward after its formation. As the name suggests, this candlestick pattern consists of three consecutive bullish candles (green candles).
This candle opens within the body of the previous candle and closes above the high price of the previous candle. Additionally, these candles should not have wicks that are too long compared to the actual body of the candle. It is preferable for this pattern to appear after a significant downtrend. This is because it provides a stronger bullish momentum indicator in that situation.
Three White Soldiers Candlestick Pattern – Formation
Not all green three candlestick shapes can be considered three white candles. For a 3 candlestick pattern to be considered a 3 white soldier, a few things must be met:
- All three candles must have been long-bodied.
- The open price of each candle must be within the body of the previous candle and the close price must be higher than the high price of the previous candle.
- A candle should have a small wick compared to its body.
Three White Soldiers Candlestick Pattern – Psychology
The formation of this pattern usually indicates a change in market sentiment. Because this pattern usually follows a bearish trend, it indicates positive sentiment toward a particular stock.
Three green candles with little or no wick show increasing buying pressure and continuation of buying pressure over three periods. This continuation of buying pressure is what drives market sentiment. This is because the formation of this pattern is usually seen when more buyers enter the market.
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Three White Soldiers Candlestick Pattern – Strengths
This pattern can be formed in any trend, but the indicator is less likely to be successful if it appears in an uptrend or sideways trend. Additionally, there are situations where the formation of this pattern has a higher probability of a bullish reversal and has a stronger signal.
- Formation after a long downtrend: When this pattern forms after a fairly long downtrend, it has a stronger bullish reversal signal because it shows that the stock’s selling pressure has dried up and buying pressure has increased.
- Formation in a strong support zone: Support zones are formed when a stock’s price reacts to a specific price or reaches that price more than once before rising in price. A strong support zone is formed when the price reacts to that price multiple times. So, once this pattern forms in that area, the price will react again and not fall below that price.
- If RSI is in oversold territory: If the RSI is in oversold territory when this pattern forms, it indicates that the stock has been sold for a long time and could be purchased at a good price. This may attract more buyers, increasing the likelihood of bullish momentum.
Three White Soldiers Candlestick Pattern – Trading Ideas
Traders must ensure that the previous trend before this pattern was formed was a downtrend. When this pattern is formed in a downtrend, here are some guidelines for trading:
- entry: If the price of the security rises above the closing price of the third candle of this pattern, traders can take a long position.
- Target: Traders can exit a trade when the price of a security reaches an immediate resistance zone. Once you reach this level, you can also book a partial profit on the trade and hold the remaining position until the next trade. resistance level.
- Stop Loss: Traders can set a stop loss near the closing price of the first candle of this pattern.
Three White Soldiers Candlestick Pattern – Example
On the AXIS BANK daily chart above, we can observe the formation of three white bottle candle patterns. We can also see that this pattern was formed after a significant downtrend. After this pattern was formed, the stock took a bullish reversal.
When this pattern was formed, traders could have taken a long position at Rs. 654.55 and the stop loss was Rs. 624.15
Limitations of the Three White Soldiers Candlestick Pattern
No technical analysis can be 100% accurate and there is always a chance that the price may move against the indicated indications. This pattern can also form during a retracement while the price is in a downtrend. Therefore, it is important to combine this or other candlestick patterns with other technical analysis methods and set appropriate stop losses.
Three White Soldiers Candlestick Pattern – Highlights
- For indicators with a higher probability of success, the previous trend must be downward.
- Three green candles in a row should have long physical bodies.
- A candle must open within the actual body of the previous candle and close above the high point of the previous candle.
- A candle should have a small wick compared to its body.
- This pattern usually indicates a bullish reversal.
- It usually shows changes in market sentiment.
Read more: high wave candlestick pattern
conclusion
The Three White Soldiers candlestick pattern can appear in any market and usually indicates a bullish reversal. However, it is recommended to take long-term trades only when the pattern appears to be bearish. When it appears during an uptrend, it has historically been observed to work better as a bullish continuation indicator.
Traders should not rely solely on this pattern but should also include other technical tools and indicators to confirm their price predictions. It is important to set a stop loss to minimize losses if the stock price moves against our analysis. What are your views on the Three White Soldiers candlestick pattern? Let us know in the comments section below.
Written by Praneeth Kadagi
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