Three Stars in the South

Three Stars in the South

Three Stars in the South is a three candlestick bullish reversal pattern. The pattern occurs in a downtrend, where the first candle is long bodied and black with a long wick. The second day looks similar to the first and has a higher low than the first candle. The third candle is a Marubozu which is within the high to low range of the second candle.


The Bullish Three Stars in the South formation suggests weakening in the established downtrend. Although each new day is able to close lower, and despite the fact that sellers are able to drive price down illustrated by the lower wicks, those short positions are not able to get the close price to continue the strong bearish trend.

While the pattern predicts a reversal, it may only reflect shorts paring off their position (just a delay or respite in the downtrend). Thus analysts do not usually take the Bullish Three Stars in the South as a strong enough buy signal in itself. Instead analysts use it as an indication to liquidate short positions and watch for buying opportunities.

This formation is most significant after a protracted sell-off.

In non-FX Markets the Bullish Three Stars in the South require price gaps up each day. When translating this same move in price action to the Foreign Exchange Market, candles will share the same close price. Since the gap up occurs during off-exchange hours the FX version may see an upper wick.