What is Three Stars in the South?

[Jane Goodwin]

[Jane Goodwin]

[Emilio Estavez]

Hi Jane,

The Three Stars in the South refers to a bullish reversal pattern that’s made of three consecutive black candlesticks which have successively lower closes and higher lows in a steadily declining downtrend. 

There are a few things to keep in mind when identifying the pattern:

-The market should be in a downtrend

-The first candlestick is a black candlestick that has no upper shadow and a long lower shadow which appears on the first day.

-.On the second day, another black candlestick should close under the close from a day before and have an opening within the first day’s body. Also, it has a higher low. 

4. On the last day, a small Marubozu appears with a higher low.
 

[James]

Hello Jane,

Formed near the edge of a downtrend, this bullish display presents three candlesticks. The first bar has an extended lower shadow in addition to its long black body. The second bar features a black body that starts below the former opening and ends at or below the previous closing.




The last bar is black like the others only that it’s a marubozu. This means it doesn’t have wicks. Ordinarily, a marubozu candle implies a session started at the highest and ended at the lowest daily values. Note that the candles decrease in size as the trend continues to show a weakening bearish momentum. This is not only visible in the reducing daily ranges but also the successively higher lows. 
The fact that each candle swallows the subsequent one signals a bullish invasion. To ascertain the bullish control, however, wait for prices to exceed the last candlestick’s midpoint. This pattern is rare despite being accurate in predicting bullish swings.