________
Of all the Japanese candlesticks and combinations thereof, arguably the most bullish pattern is what is known as the “Three White (or Green) Soldiers.” In particular, after a downtrend or a prolonged period of consolidation, this is a bullish reversal pattern consisting of three strong closes in a row. You are looking for the open to be within the confines of the previous day, yet you want to see the stock close near the highs of that individual session. Needless to say, the white soldiers indicate a sharp change in investor sentiment and conviction, as bulls present themselves in a meaningful way to capture and hold the initiative.
One of my featured setups last evening, $BZ, is well on its way to completing this pattern. Since April, the stock had a sharp correction along with the broad market, and then tightened up as it consolidated. Today, it is on the cusp of its third consecutive close higher in a convincing manner. White the candle today is not quite the long bodied one you would look for, the first two days of the pattern were so strong that I decided to buy a full position. Note also the uptick in buying volume during the past few days, further confirming the breakout.
All trades are timestamped inside The PPT.
________
________
TOTAL PORTFOLIO:
EQUITIES: 56%
- LONG: 56% ($BZ $OVTI $ISLN $GNK $LSCC $RDWR $BX $CMI)
CASH: 44%
Thanks Chess!
Would FSYS fit the same category too? Friday’s soldier looks like its head got cut off, but today is representing the 3rd soldier, no?
Also, with this pattern (“3 white soldiers”), would you be looking for the typical pull-back, re-test, and bounce of the breakout before adding? or does the pattern typically move sideways and flag before continuing the b/o?
I like FSYS–although the 2nd day wasnt as strong as BZ’s second day.
In the very short term (the next day or two), up, down or sideways are all possible. However, the 3 white solders pattern is highly reliable over the intermediate term (10 trading days and beyond).
Thx!
Hi Chess,
Wouldn’t you wait for a pullback though? Or would you just ride any pullback that comes?
I am being aggressive. I like the pattern and am familiar with the stock.
I bought a lot of bz last year well under $1 and another large batch during the july 09 dip under $2.
I dumped the former early this year as it cleared a year of holding, and was about to dump the rest now… maybe I will hold a bit
The stock is still pretty cheap, and management at bz I like.