bullish three stars in the south

Hi Ipod,

I particularly liked the last couple of hammers on the chart followed by today's tight trading range.

Watch for the gap on open!

Bullish Three Stars in the South

• After an established downtrend, day-one is a long red day with a long lower wick
• Day-two is also a red day similar to the first, only with a smaller body and shorter bottom wick
• Day-three trades within the second days range and has a small red body with no wick at all (Red Marubozu)

The Bullish Three Stars in the South formation suggests weakening in the established downtrend. Although each new day is able to close lower, and despite the fact that sellers are able to drive price down illustrated by the lower wicks, those short positions are not able to get the close price to continue the strong bearish trend.

While the pattern predicts a reversal, it may only reflect shorts paring off their position (just a delay or respite in the downtrend). Thus analysts do not usually take the Bullish Three Stars in the South as a strong enough buy signal in itself. Instead analysts use it as an indication to liquidate short positions and watch for buying opportunities.

This formation is most significant after a protracted sell-off.

In non-FX Markets the Bullish Three Stars in the South require price gaps up each day. When translating this same move in price action to the Foreign Exchange Market, candles will share the same close price. Since the gap up occurs during off-exchange hours the FX version may see an upper wick.

http://www.fxwords.com/b/bullish-three-stars-in-the-south-candlestick.html

JB