Three Stars in the North - Bearish Reversal Candlestick Pattern

Three Stars in the NORTH Definition

The three stars in the north pattern is a bearish reversal signal. The formation is comprised of three candlesticks and it shows up near the end of a long uptrend. This pattern displays how the buying pressure is deteriorating rapidly, thus providing signs of bearish behavior in the stock. The first candlestick in the formation is a large white (green) candlestick that has very little lower shadow, but has a long upper shadow. This candle closely resembles that of a an inverted hammer. The second candlestick is just a smaller version of the first candlestick. It gaps down on the open, but then closes higher on the session. The second candlestick's body and shadows are completely engulfed by the first candlestick. The third candlestick is a white marubozu and is completely engulfed by the second candle. The white marubozu is a sign of deliberation on the part of traders with little price movement.

Three Stars in the North Charting Example

This formation resembles the three white soldiers, except for the fact the highs are not higher and the last day is not a long white (green) candlestick. Traders should wait for the low of the second candlestick in the three stars in the north pattern to be broken prior to initiating short positions. Remember, this formation is extremely rare, so if you see it quite often on the same price chart, the strength of the setup diminishes greatly.

Three Stars in the NorthThree Stars in the North

 


Tim Ord
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Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...

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