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Technical analysis stock tutorials - Trading the Tri-Star Pattern

Technical analysis stock tutorials provided by The Candlestick Forum. This is part of our ongoing training for technical analysis stock tutorials for trading candlestick charts and candlestick patterns. We hope you are benefiting from the weekly additions of these secondary candlestick chart patterns and encourage you to check back often. For a complete list of all the technical analysis stock tutorials in our site you will want to begin with The Major Candlestick Signals (click here.)

Tri Star Pattern

Description

The Tri Star pattern is relatively rare.  However, it is a very significant reversal indicator. It is comprised of three Dojis. The three-day period illustrates indecision of a period of days.

 

Criteria

  1. All three days are Dojis.
  2. The middle day gaps above or below the first and third day. The length of the shadow should not be excessively long, especially when viewed at the end of a bullish trend.

Signal Enhancements

  1. The greater the gap, away from the previous days close, sets up for a stronger reversal move.
  2. Large volume on one of the  signal days  increases the chances that a significant reversal is taking place.


Pattern Psychology

After an up-trend or a downtrend has been in effect, the appearance of the first  Doji reveals that there is now indecision in the bullís and the bearís camp. The next day gaps in the same direction as the existing trend and forms the second Doji. This reveals that no certainty for either direction has become apparent. The third day opens opposite the previous trends direction and forms another Doji that day. The final Doji is the last gasp. Any investor that had any conviction is now reversing their position. Because of the rarity of this pattern, double-check the data source to confirm that the Dojis  are not bad data.

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