Trade Mini Course - Yin Yang Candle Patterns
Bottom reversal: three white warriors
If you see three consecutive rising positive lines on the stock chart, it may be a precept of trend reversal.
This candlestick form has a special name called three white warriors.
This article will give you a deeper understanding of this pattern.
What are the three white warriors?
The three white warriors are a common bullish candlestick pattern that usually appears in a downtrend.
As the name implies, its pattern is composed of three rising sun rays, and the closing price of the three Yang route is higher every day.
If the stock has seen three White Samurai movements, it may imply that this is a potential bullish signal.
How were the three white warriors formed?
A standard of three white warrior forms, generally has the following characteristics:
For three consecutive days, there was a rising sun. Ideally, the physical size of the three Yang wires is similar.
The opening price of each candlestick is within the previous entity.
The closing price of each Yang line is higher than the previous day's closing price. Form a structure with a rising ladder.
The closing price of each Yang line is the highest price of the day or the nearest high price. Therefore, there is almost no upper or short shadow on the K-line.
When three white warriors appear at the bottom of a downtrend, it indicates that the bearish strength is failing, the bulls strength is strengthening, so it may be a wave of upward open signals.
Experienced investors may create long positions to profit from them. But whether the trend reversal really occurs, it needs to be observed further with other technical indicators.
It is worth noting that the three white warriors form may also appear in the consolidation of the uptrend, this time it implies that the trend may continue, not reversed.
How to identify the three white warriors?
In the actual trade, how to use the three white warrior form as a reversal signal, you can follow the following steps:
Determine the downtrend: Find a clear downtrend before the pattern arises, which sets the foundation for a potential reversal.
Find three continuous rising sun lines: At the bottom of the downtrend, three consecutive rising sun lines appear, the entity size is similar, and each K line opening price is within the previous day entity, closing price close to the day's highest price, forming three White Samurai. This means that bulls may have a firm control over the situation and the trend may reverse.
Focus on trading volume: Ideally, if the three rising sun rays are accompanied by higher turnover, it is the “volume and price rise” that we often say, it is more conducive to bullishness in the market.
It is worth noting that if the third K-line rose malaise or appear long shadow, should further observe its development.
In addition, after the three soldiers form, sometimes there may be a short-term consolidation market, but the overall mood is still bullish.
case analysis
The chart below shows the Caterpillar (CAT) stock price on a daily chart of three White Samurai forms.
On the chart, you can see that before the three White Knight appeared, the stock experienced a clear wave of decline, indicating a strong selling mood.
At the bottom of the downtrend, rising sun for three consecutive days, opening every day within the entity of the day before, the closing price is equal to or close to the day's highest price, forming three white warrior forms, indicating bulls in firmly grasp the initiative, revealing the bottoming stock signal.
After that, Caterpillar share price did usher in a small wave of rally.
summed
The three white warriors are a bullish pattern consisting of three candlestick, usually appearing at the bottom of a downtrend. Some traders use this pattern to help identify potential entry opportunities.
However, this pattern is not 100% effective and failure is also very common.
In actual combat, candlestick patterns should be combined with other technical analysis tools to better assist trading decisions.
