Tri-Star Bullish and Bearish Reversal Candlestick Pattern

THE TRI-STAR

The tristar is a very rare reversal pattern. As shown in Exhibit 6.18, the tristar is formed by three doji lines at a new high for the move. For my candle-charting research, I followed a rule before revealing a pattern or signal: It had to be corroborated by at least two independent sources. This helped confirm the tried-and-true techniques and helped avoid the hundreds of possible patterns that anyone can think of. (This is why I warn traders to be careful about other sources of candle-charting information.)

Exhibit 6.18. Tri Star Top and Bottom

This tristar is an exception to my rule of corroboration. I got this from a single source. It came from a Japanese trader who used candle charts all his professional career. More important, he told me his father had found this particular pattern decades ago and successfully used it. My feeling is that a pattern with this much history deserved to be included.

The ideal tristar top has three doji (remember that the plural of doji is also doji) with the middle doji higher than the first and second doji. (This is reminiscent of the Western head and shoulders top, where the head is higher than the left and right shoulders.) In Exhibit 8.19, there are dual hammers during the week of January 3. This built a foundation for a rally that gave a hint that it was exhausting itself via the doji on January 10. After this doji, Honeywell settled into a mostly lateral range, but in doing so formed a tristar top. Although this stock fell steeply after the tristar top, it should be remembered that candle charts do 

Exhibit 6.19. Honeywell-Daily (Tri Star Top)

not predict moves. As such, while this pattern greatly increased the chances for a top reversal, it did not forecast the extent of the potential decline. Note also the tristar top in Exhibit 6.14 in mid August.