Three Stars in the South - Bullish Reversal Candlestick Pattern

Three Stars in the South Definition

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

Three Stars in the South Charting Example

This formation resembles the three black crows, except for the fact the lows are not lower and the last day is not a long black candlestick. Traders should wait for the high of the second candlestick in the three stars in the south pattern to be broken prior to initiating long 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 SouthThree Stars in the South


Tim Ord
Ord Oracle

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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