What Is Unique Three River

The unique three river is a candlestick chart pattern that predicts a bullish reversal, although there is some evidence that it could act as a bearish continuation pattern.

Breaking Down Unique Three River

The unique three river is a candlestick chart pattern that meets the following criteria:

  1. The market is in a bearish downtrend.
  2. The first candle has a long real body.
  3. The second candle is a hammer with a lower shadow that sets a new low.
  4. The third candle has a short white body that’s below the real body of the second candle.
  5. The third candle does not exceed the high or low of the second candle.

The long real body of the first candle shows that bears control the prevailing trend while the hammer in the second candle suggests that bulls are regaining strength following a protracted decline. In the third candle, the open comes in higher than the prior period’s low and the small white body shows signs of stability and the potential for a move higher.

These dynamics suggest a potential bullish reversal from the downtrend, although there is some evidence that it more often leads to a bearish continuation. As a result, it is important for traders to consider the candlestick pattern within the context of other technical analyses, such as technical indicators or chart patterns over a longer timeframe.

Unique Three River Trading Psychology

The wide range decline on the first trading day drops the security to a new low, illustrating that bears control price action. Weakened bulls make a stand on the second trading day, reversing the security after it hits a new low (below the first candle).  Their buying power lifts the security into a close in the upper half of the first candle's range. The security opens lower on the third trading day, signaling a reduction in bull power but bears fail to capitalize on that weakness, generating an indecisive session within the trading range of the second candle.  

This behavior may indicate that bear power is waning, setting the stage for a bullish price thrust on the fourth trading day. . An aggressive trader may wish to open a long position near the close of the third candle to take advantage of the expected reversal.  However, a decline on the fourth trading day that carries through the low of the second candle negates the bullish signal, setting off a new sell signal that indicates the downtrend stil hasn't come to an end.