What is 'Three White Soldiers'

Three white soldiers is a bullish candlestick pattern that predicts the reversal of a downtrend. The pattern consists of three consecutive long-bodied candlesticks that open within the previous candle's real body and a close that exceeds the previous candle's high. These candlesticks should not have very long shadows and ideally open within the real body of the preceding candle in the pattern.

BREAKING DOWN 'Three White Soldiers'

The three white soldiers candlestick pattern suggests a strong change in market sentiment. Without any significant shadows, the market opens slightly lower, the bulls take over the rally all session and close near the high of the day. The pattern may appear during periods of consolidation or following a prolonged downtrend, but the latter represents the most attractive opportunity for traders to take long positions. In addition, the pattern may be preceded by other candlestick patterns suggestive of a reversal, such as a doji.

When trading the three white soldiers pattern, it's important to note that the strong moves higher could create temporary overbought conditions. The relative strength index (RSI), for example, may have moved above 70.0 levels. In some cases, there is a short period of consolidation following the three soldiers pattern, but the short- and intermediate-term bias remains bullish. The significant move higher could also reach key resistance levels where the stock could experience consolidation before continuing to move higher.

For these reasons, traders use the three white soldiers, and other such candlestick patterns, in conjunction with other chart patterns and technical indicators. For example, traders may look for areas of upcoming resistance before initiating a long position or look at the level of volume on the breakout to confirm that there was a high amount of dollar volume transacting. If the pattern occurred on low volume with near-term resistance, traders may wait until there is further confirmation of a breakout to initiate a long position.

The opposite of the three white soldiers is the three black crows candlestick pattern.

Three White Soldiers Example

Example of a three white soldiers candlestick pattern.

In the above example, the ETF had been in a strong bearish downtrend over the course of several weeks before the three white soldiers pattern marked a sharp bullish reversal. The pattern may suggest that the rally will continue, but traders may also look at other relevant factors before making a decision. For example, the stock may have reached an area of resistance or the move may have been on low volume.

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