The ‘Three White Soldiers’, also known as ‘Three Advancing White Soldiers’ is a high credibility bullish reversal pattern consisting of a sequence of three white candlesticks that looks like an ascending staircase. While a bullish reversal the pattern is often mistaken for the similar looking and lesser known ‘Advance Block’ and ‘Stalled Pattern’ which are in-turn bearish reversal setups.
Technical Description
1) The pattern should be preceded by a bearish market.
2) Ideally the body of the first white candlestick should be above the low of the preceding candle.
3) The second and third white candlesticks should open inside the body of the preceding and close with a new high.
4) The lows for each of the three candlesticks should be in ascending order.
5) None of the white candlesticks are spinning tops and ideally should have long bodies.
Mark’s Perspective
Given the similarity and the opposite interpretation of the ‘Three White Soldiers’ to an ‘Advance Block’ and ‘Stalled Pattern’ the existence of a bear market before the setup occurs has to be visually verified. The preceding bear market must be substantially bigger than patterns range.
When they appear inside a trading range be sure there is sufficient room for prices to move higher until the ranging market’s resistance or that the pattern actually managed to generate a breakout. Otherwise it may be more appropriate not to take the trade. If the candlesticks involved are very long you risk being overbought already. It would be better to wait for prices to pullback inside the pattern before taking action.
Ideally ‘Three White Soldiers’ should be preceded by a long downtrend. The white candlesticks are a suggestion that the trend has matured and is poised to turnaround. For better prices, look for buys from well within the body of the last white candle with stops below the pattern lows. The subsequent bull market may be a long drawn out process.