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Three stars in the south is a bullish reversal candlestick pattern indicating the start of a new uptrend after an established downtrend. This is a rare candlestick formation which is formed of three bearish (colored or black) candlesticks. The bullish three stars in the south pattern is similar to the three black crows candlestick pattern, and the first two candlesticks in the pattern resemble hammer candlesticks.


The requirements of bullish three stars in the south formation include:

• The pattern should form at the bottom of a significant downtrend.
• The first day is a long bearish day with a very long lower shadow and with no or very small upper shadow.
• The second day is also a bearish day with a lower close. The candlestick is a smaller version of the first day candlestick which stays within the trading range of the first day candlestick.
• The third day candlestick is a small bearish marubozu (no upper or lower shadow) with a lower close which stays within the second day’s trading range.

Three stars in the south candlestick pattern occurs when bears fail to continue the existing downtrend. The facts that the bears are continuously failing to close lower even after bringing the prices to lower levels (indicated by long lower shadows) and that the prices stay within the trading range of the previous day, tempt many short sellers to close their positions and tempt bulls to establish an uptrend.

Three stars in the south is a moderately reliable candlestick formation. The pattern is used as an indicator by many short sellers to close their positions. Traders should ideally wait until the high of the second candlestick in the three stars in the south pattern is broken before starting long positions. Confirmation of trend reversal is signified by a bullish candlestick, a large gap up or a higher close on the next trading day.

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