This is the three candle bullish trend reversal pattern.This is one of rare bottom reversal signal.This pattern contains doji star which is gap away then previous day and following day. The formation of three period reversal of market sentiment where after a bearish trend, finally enough buyers enter the market to take control. They first stop the trend’s momentum forming the doji, and then ultimately reverse the direction of the market.
Acknowledging Criteria:
1. Market is in prolonged downtrend.
2. We can see long bearish black candle in first day.
3. Then doji appears on second day whose high price is lower than previous day low.
4. The we see long white bullish candlestick whose low price is higher than doji’s high price.
Explanation:
We have a similar scenario that is valid for most of the three-day star patterns. In a falling market, the market shows bearish strength first with a long black candlestick and opens with a gap on the second day. The second day trading is within a small range and second day closes at or very near its open. This now suggests the potential for a rally showing that positions are changed. The signal of trend reversal is given by the white third day and by well-defined upward gap.The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested.