Bullish Three Stars in the South Pattern

by · December 31, 2009

BULLISH THREE STARS IN THE SOUTH PATTERN (BTSSP)
daily small downward rallies that will suddenly turn bullish

Characteristics:
1. Market is on a downtrend;
2. Day 1 has a long Black Opening Marubozu (BOM) characterized by a long lower shadow (just like a hammer);
3. Day 2 has a smaller BOM with a low above Day 1’s low; and
4. We see a small Black Marubozu on Day 3 that lies within Day 2’s trading range.

Brief Explanation:
In this pattern, we see 3 consecutive black sticks during a downtrend. These sticks show that each succeeding day is weaker. The sentiment is bearish and some buying is occurring. The daily small rallies keep the market’s lows from reaching that of Day 1. These events suggest that the tide is slowly turning bullish.

Note:
1. A confirmation on Day 4 is required to ensure that the downtrend has reversed (through a white candlestick, a large gap up or a higher close).