STOCK GOODIES PLAYS OF THE WEEK

[Black_NITE]

THREE STAR IN THE SOUTH

We see three consecutive black candlesticks during a downtrend. These candlesticks show that each day is consecutively weaker in a bearish sense and possibly some buying is occurring. Daily small rallies keep the market’s lows from reaching that of the first day. These indications suggest that tide is turning in a bullish direction.



Recognition Criteria:

1. Market is characterized by downtrend.
2. We see a long Black Opening Marubozu in the first day characterized by a long lower shadow just like a Hammer.
3. Then we see a Black Opening Marubozu on the second day similar to the first day however smaller in body with a low above the first day’s low.
4. We finally see a small Black Marubozu on the third day that lies within the second day’s trading range.
Explanation:

The Bullish Three Stars in the South Pattern shows a slowly deteriorating downtrend, which is characterized by less and less daily price movement and consecutively higher lows. Buying enthusiasm is reflected by the long lower shadow of the first day. The next day opens at a higher level, trades lower, but its low is not lower than the previous day's low. This second day also closes off its low. Then we see a black Marubozu, which is engulfed by the previous day's range on the third day. Higher lows cause uneasiness among shorts. The last day of the pattern reflects market indecision, with hardly any price movement. Shorts are now ready to cover positions if they see anything in the upside. Everything points out that the tide is slowly turning toward the bull side.

Important Factors:

A confirmation on fourth day is required to be sure that the downtrend has reversed. This confirmation may be in the form of a white candlestick, a large gap up or a higher close on the fourth day.