|
Skip to a different definition: |
|
A
- B - C -
D - E
- F - G -
H - I
- J - K -
L - M
- N - O -
P - Q
- R - S -
T - U
- V - W -
X - Y
- Z |
|
| Three
White Soldiers Candlestick Formation |
THREE ADVANCING
WHITE SOLDIERS CAN HELP YOU FIGHT FOR PROFITS
In one of our recent educational lessons we discussed the
candle formation known as "three black crows." Occurring after
a strong advance, three black crows is a reversal formation that
consists of three consecutive down days. On each of these days it
appears the stock wants to rally, but the bears then exert control and
the stock closes at or near its lows for the day.
The bullish counterpart of three black crows is known as "three
white soldiers" and is considered by some candle theorists as one
of the most bullish candle patterns. The three white soldiers pattern is
most potent when it occurs after an extended decline and a period of
subsequent consolidation. When a particular stock posts a decline
followed by a sideways movement, the appearance at that point of three
white soldiers signals that higher prices are likely ahead.
The first of the three advancing white soldiers is a reversal candle. It
either ends a downtrend or signifies that the stock is moving out of a
period of consolidation after a decline. The candle on day two may open
within the real body of day one. The pattern is valid as long as the
candle of day two opens in the upper half of day one's range. By the end
of day two, the stock should close near its high, leaving a very small
or non-existent upper shadow. The same pattern is then repeated on day
three. Below you will find an illustration of the three white soldiers
candlestick pattern:
Although this candle pattern is very
potent when a stock is at or near its lows, it should be regarded
skeptically if it appears following a long advance in price. If you spot
three white soldiers after a sustained rally, then it may mean a top is
near. Be on the alert then for a reversal candle such as a doji or
negative engulfing.
The chart of Autobytel (ABTL) below provides a good example of three
white soldiers at the end of a consolidation period. ABTL peaked in
early October at $12 and by early December had retraced to just under
$8. The stock then bounced up above $9 and consolidated in a very narrow
range until the end of the month.
So far, the year 2004 has been kind to
Autobytel. Before Friday's sell-off the stock had advanced four days in
a row with escalating volume. ABTL is still outside its upper Bollinger
band -- a continuation signal. Meanwhile, the ADX indicator has given a
strong buy signal, with +DI surging through –DI and the black ADX line
beginning to trend upward from a very low level. The moving averages are
all in "bullish alignment" with the four-day above the nine,
which is above the twenty, which is above the thirty. Although the stock
will likely need to consolidate after posting such a rapid, strong
advance, it should ultimately test the previous October high at $12.70.
The "three white soldiers"
pattern does not occur frequently, but as a swing trader you should
definitely be on the lookout for it. These soldiers make great allies in
your battle for swing trading profits.
|
|
