Candlestick Patterns - Three White Soldiers / Three Black Crows

I am back. Been too busy exploring new city and visiting places and it is nothing short of wonder that I still find time to write. I must be addicted I guess. Will go to JM for rehab once I am back.

Coming back to the Candlestick Patterns... today it is turn of Three White Soldiers and Three Black Crows. Both these do not occur as often as the major reversal patterns and hence are called secondary patterns. Though uncommon (just like common sense) they are very strong and reliable indicators.

Three White Soldiers

Have a look at the pattern here.

This pattern is characterized by three consecutive White (Green) candles where each candle opens within the body of previous candle and closes above it. The close is usually at or near day's high. This pattern usually occurs at the end of a long down or sideways move.

First candle indicates the exhaustion of current trend by indicating a close near day's high. Second day the price opens lower indicating sellers are still present in the market but as the day progresses, buyers overwhelm them. This is repeated again on third day indicating a definitive trend reversal.

Three Black Crows

The Pattern.

In one sentence; this is Three Black Soldiers pattern.

It is named after crows probably because Japanese people think of crows as evil birds. Needless to say, this pattern appears after a long uptrend indicating the reversal. First day indicating the change in trend and second, third days indicating unsuccessful denial by buyers. This pattern is further strong if price closes at or near day's low.

I am not posting a example of these patterns here but will mention one. Around middle of March 09 when NIFTY was around 2550-2600 level after prolonged downtrend, Three White Soldiers appeared. What followed was one of the most spectacular bullish phase taking NIFTY to above 4600 by Mid Jun (over 2000 points in 3 months) and above 5000 by Nov.

Will come back soon with the final multi-candlestick pattern. Then we proceed to charts and patterns in them along with indicators and oscillators. Can't wait to get there. It will be fun for sure.

Will try to post one today at Options Blog and will try to revive Futures Blog too. Till then, enjoy rehab.

Investing explained well...

Well, wanted to write about the next candlestick pattern but just being lazy right now. My cousin is visiting me here in Singapore and we are watching www.bcci.tv for a delayed feed of India Vs West Indies one-dayer... what a harakiri by Indians.

Anyway, since I am not writing about candlestick pattern why not share ultimate secret of Stock Investing with you. So behold friends... all your questions and queries about investing are irrelevant and all you need is know this well kept and extremely guarded secret of stock markets.

This secret is exclusively bought to you by your friend... that is your's truly. Don't forget to thank me for this. Have a look at it here and let me know what you think of it.

Next post soon.

Candlestick Patterns - Evening Star / Evening Doji Star

It's been so long since I wrote here that I had to read my last post to get myself in the 'zone' again. I almost forgot what we were discussing here. Anyway, I am back to make a post here and that is important. Let's get on with that.

Evening Star

It is easy to guess that this patterns is opposite of Morning Star. Not enough innovation (thankfully) in naming these patterns. So Evening Star is a three candlestick bearish reversal pattern. It is found at the end of a uptrend. The first candle is a long white (or green) candle indicating a day belonging to bulls where stock saw the positive price movement as per the continuing trend. Second candle is again a white candle indicating another positive day but this time body is not as long and but the shadows are long indicating indecision in the market. Third day confirms the reversal by being a black (or red) candle indicating bears taking over control. See below.

as in the earlier post, the strength of the reversal is judged by two things. The volumes of the trade on the third day and the length of the black candle with respect to the white candle of the first day. If the black candle of the third day is reaching or going up more than the half of the first day white candle; it is considered very bearish.

Evening Doji Star

Evening Doji Star is as you can guess is similar to above pattern with only difference being the middle candle is a (black or white) Doji instead of a simple black candle. See below.

Evening Doji Star is considered a stronger bearish reversal pattern. One very important thing to note here is the second candle of Doji can be more than one. It can be one, two or even three Dojis in some cases.

Example of Evening Doji Star above is from the daily chart of CNX NIFTY Junior Index. The Evening Doji Star was formed around mid July at a level of approximately 11400. Since then it had corrected to a level of 9600 (more than 15% correction) by end August. Please excuse me for the bad graphics.

This is as far as Evening Star / Evening Doji Star. We will see Three White Soldiers / Three Black Crows next. Thanks for bearing with me in the meantime. I am still in Singapore with no clear input on when to return. Could be a month or so till I am stuck here. Have posted some snaps of Sentosa Island on FB.

Missing NIFTY here.