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Bearish Tri-Star Candlestick Pattern
The Bearish Tri-Star is a rare candlestick pattern that signals a potential reversal in the ongoing uptrend, indicating that a bearish phase might be on the horizon. It is characterized by three Doji candles appearing consecutively, each gapping higher than the previous one, acting as a warning of an upcoming trend reversal.
Formation of the Bearish Tri-Star Pattern:
- The pattern emerges during an uptrend, indicating that the buyers are currently in control.
- The first candle in this pattern is a Doji, reflecting indecision in the market where the opening and closing prices are nearly equal.
- The second candle is another Doji that gaps above the first one, reinforcing the state of uncertainty amongst traders.
- The third Doji also gaps above the second one, amplifying the indecision. This unusual sequence of gapped-up Doji candles signals that the uptrend is losing its momentum and a bearish reversal may be imminent.
The Bearish Tri Star function detects this pattern by ensuring the following conditions are met:
- The first, second, and third candles are all Dojis, signifying a balanced struggle between buyers and sellers.
- The second Doji gaps up from the first, and the third Doji gaps up from the second, indicating an increased level of uncertainty and volatility.
While the Bearish Tri-Star is a potent indication of a possible bearish reversal, it is essential for traders to seek confirmation from other technical indicators or candlestick patterns to fortify the validity of this signal. A subsequent bearish candle or a gap down can act as a confirmation of the bearish outlook, guiding traders in making informed decisions.