Three white soldiers is a candlestick chart pattern in the financial markets. It unfolds across three trading sessions and suggests a strong price reversal from a bear market to a bull market. The pattern consists of three long candlesticks that trend upward like a staircase; each should open above the previous day's open, ideally in the middle price range of that previous day. Each candlestick should also close progressively upward to establish a new near-term high.[1]
The three white soldiers help to confirm that a bear market has ended and market sentiment has turned positive. In Candlestick Charting Explained, technical analyst Gregory L. Morris says "This type of price action is very bullish and should never be ignored."[2]
This candlestick pattern has an opposite known as the Three Black Crows, which shares the same attributes in reverse.
The Three White Soldiers is a bullish pattern which forms after a strong downtrend or a prolonged consolidation. The appearance of this pattern, suggests that participation in the stock is increasing in a sustained manner, leading to a rise in price.
Now, if we look at the chart below, and correspondingly study the momentum indicator: RSI (Relative Strength Index), we see that a very interesting phenomenon has surfaced.
Earlier, within the consolidation, we saw that the price was resisting at the level of 880 whereas RSI turned down from the 50 level. But, this time, though the price is still near the level of 880, RSI has already broken above the 50 level and crossed over the previous highs. Adding on to this, currently, RSI is marking the 64 level, which is the ‘bull trend’-range.
Therefore, from the combined study of the candlestick chart of HCLTECH and the momentum indicator RSI, we can conclude that there has been an evident shift in the sentiments and the level of 880 is the resistance which the stock needs to overcome to really prove the usefulness of the candlestick pattern – Three White Soldiers, and the RSI ‘Range Break’.
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