Important to note is that with candlesticks a reversal pattern does not necessarily suggest a complete reversal in trend, but merely a change or pause in direction. That could mean anything from a slowdown in trend, sideways trading after an established trend, or a full turnaround following a reversal candle pattern.
Three Outside UP
• After an established downtrend, day-one continues the trend with a red candle
• Day-two is a long blue day that engulfs the body of the first day, closing well above the previous days open. •
The third day is a blue day with an even higher close than the second day.The Bullish Three Outside Up pattern is one of the more clear-cut three day bullish reversal patterns. The formation reflects buyers overtaking selling strength, and often precedes a continued rally in price. In fact up to day-two we have a bullish Engulfing Pattern, itself a strong two-day reversal pattern.
• The first day is a long red day continuing an established down trend.
• The first day is long red day
• Second day is a doji that opens at the previous day close
• The doji wicks should not be long
The Doji Star formation starts as the bear market continues with a strong red day. The second day however trades within a small range and closes at or near its open. This small range suggests uncertainty in the market, and in fact candlestick analysts consider the smaller the doji the better for strength of signal. This is taken as a sign that sellers are losing control, bearish momentum is weakening and buyers are regaining control. For strong confirmation of trend reversal, watch for a blue day with a higher close on the third trading day. Such a formation on the third day would be the strong Bullish Abandoned Baby or Morning Star Doji. In non-FX markets that do not track price 24 hours, traders watching for added signals of strength in this formation would look for a gap to take place on the second day, as the Doji Star open below the previous days close. Such a gap of course is not possible in the Forex Market, unrestrained by artificial exchange hours.
• After an established downtrend, day-one is a long red day with a long lower wick
• After an established downtrend
• There dojis (open and close at identical price) occur on consecutive trading days
In a long bearish market the strength of trend shows weakness as candle bodies grow progressively smaller, eventually forming three consecutive dojis. A doji candle reveals market indecision, since neither buyers nor sellers prove able to move the close price away from the open. This kind of price action is quite common during periods with limited market activity like holidays. But after a protracted downtrend or during periods of high trading volume a number of dojis can suggest a reversal in market trend. Candlestick analysts will watch for buying opportunities to come after the Bullish Tri Star pattern. The non-FX version of Bullish Tri-Stars often sees a number of gaps between dojis. This suggests price moved while exchanges were closed. Of course such gaps between open and close prices are unlikely in more efficient, 24 hour Foreign Exchange Markets. This formation would thus appear as three dojis in a row. Realistically translating the same price-action from non-FX to Forex Markets would allow some leeway in the appearance of the three dojis, possibly morphing them into star candles with limited ranges.
• The first day is a red day confirming a bearish trend, closing at the lower trading range near the days low
• Day-one is a red day, continuing an established trend and closing at the lower trading range near the days low