Three White Soldiers

What Do Three White Soldiers Mean?

Three white soldiers is a bullish candlestick pattern that is utilized to foresee the reversal of the current downtrend in a pricing chart. The pattern comprises of three continuous long-bodied candlesticks that open inside the previous candle's real body and a close that surpasses the previous candle's high. These candlesticks shouldn't have extremely long shadows and in a perfect world open inside the real body of the first candle in the pattern.

What Do Three White Soldiers Tell You?

The three white soldiers candlestick pattern recommends a strong change in market sentiment in terms of the stock, commodity or pair making up the price action on the chart. At the point when a candle is closing with small or no shadows, it proposes that the bulls have managed to keep the price at the highest point of the reach for the session. Essentially, the bulls assume control over the rally all session and close to the high of the day for three sequential sessions. Moreover, the pattern might be gone before by other candlestick patterns suggestive of a reversal, for example, a doji.

Here is an illustration of three white soldiers showing up in a pricing chart for the VanEck Vectors Fallen Angel High Yield Bond exchange traded fund (ETF).

The ETF had been in a strong bearish downtrend throughout a long time before the three white soldiers pattern denoted a sharp bullish reversal. The pattern might propose that the rally will proceed, yet traders may likewise check out at other important factors before going with a choice. For instance, the stock might have arrived at an area of resistance or the move might have been on low volume.

Illustration of How to Trade Three White Soldiers

As three white soldiers is a bullish visual pattern, it is utilized as an entry or exit point. Traders who are short on the security hope to exit and traders who are waiting to take up a bullish position consider the three white soldiers to be an entry opportunity.

While trading the three white soldiers pattern, it's important to note that the strong moves higher could make brief overbought conditions. The relative strength index (RSI), for instance, may have moved above 70.0 levels. At times, there is a short period of consolidation following the three soldiers pattern, however the short-and middle of the road term bias remaining parts bullish. The critical move higher could likewise arrive at key resistance levels where the stock could experience consolidation before continuing to move higher.

The Difference Between Three White Soldiers and Three Black Crows

Something contrary to the three white soldiers is the three black crows candlestick pattern. Three black crows comprise of three continuous long-bodied candlesticks that have opened inside the real body of the previous candle and closed lower than the previous candle. Though three white soldiers get the momentum shift from the bears to the bulls, three black crows show the bears taking control from the bulls. Similar admonitions about volume and extra confirmation apply to the two patterns.

Limitations of Using Three White Soldiers

Three white soldiers can likewise show up during periods of consolidation, which is a simple method for getting caught in a continuation of the existing trend as opposed to a reversal. One of the key things to watch is the volume supporting the formation of three white soldiers. Any pattern on low volume is suspect since it is the market action of the couple of as opposed to the many.

To combat the limitation of visual patterns, traders utilize the three white soldiers and other such candlestick patterns related to other technical indicators like trendlines, moving midpoints and bands. For instance, traders might search for areas of impending resistance before starting a long position or take a gander at the level of volume on the breakout to affirm that there was a high amount of dollar volume executing. On the off chance that the pattern happened on low volume with close term resistance, traders might hold on until there is further confirmation of a breakout to start a long position.

Highlights

• Three white soldiers are viewed as a dependable reversal pattern when confirmed by other technical indicators like the relative strength index (RSI).
• The size of the candles and the length of the shadow is utilized to judge whether there is a risk of retracement.
• The contrary pattern of three white soldiers is three black crows, which shows a reversal of an uptrend.