Candlestick analysis. Continuation patterns. Part 2. Alexander Sivtsov.

In the previous article “Candlestick analysis. Continuation patterns. Part 1.” I introduced the “Window” continuation pattern. Today we will talk about the patterns “Three Methods”, “Three White Soldiers” and “Three Black Crows”, that are excellent assistants in trade.

Candlestick Analysis – Pattern “Three Methods”

The “Three Methods” is a continuation pattern formed both in an upward and in a downward trend. The bullish version of the three-method model is formed from a long rising candlestick and a group of small drop candlesticks that follow white.

The main condition for the formation of a bull pattern “Three Methods” is that small candlesticks should remain in the price range of a long growing candlestick, while the color of small candles can be different, but black candlesticks are more common. Also, this model of continuation of the movement is similar to the patterns “Flag” and “Pennant”, used in the western school of trading. The basis of this pattern is the consolidation of the market between significant movements in the market.

A bearish version of the pattern is formed with a downtrend. Building a pattern is started with a long bearish candlestick and three small after it of about it, usually white candlesticks, which will indicate some respite in the market before continuing further downward movement. An experienced trader will take into account such a formation in the market and enter into lucrative deals.

Candlestick Analysis – Pattern “Three White Soldiers”

The model starts in an uptrend after a financial instrument has made some correction (rollback). The essence of the pattern is that if, after correction in a bullish trend, three upward candlesticks have formed, and each of the candlesticks should close above the previous one, and it serves as a signal of the end of the correction and the resumption of the upward movement.

It is noteworthy that bullish candlesticks should not be very large, since the formation may signal an overbought instrument and in such a situation it will be more risky to enter the market with the expectation of further growth.

Also, this pattern is formed in a bearish trend and is called “Three Black Crows”. A model is formed after a pullback in a bearish trend, after which three downward candlesticks are formed on the market, which will signal a continuation of the downward movement.

If during the formation of the “Three White Soldiers” or “Three Black Crows” patterns one of the candlesticks closes below or, respectively, above the previous one, it will be a braking pattern that signals the weakness of the main movement in the market.

Candlestick analysis is one of the key moments of technical analysis of charts. Knowledge and understanding of it will increase significantly the number of positive transactions and, accordingly, profit margins.

Alexander Sivtsov