Tristar: A Powerful Candlestick Pattern for Precise Trading

THE TRI STAR

TRISTAR Description

The Tri Star pattern in Figure 2.49 is relatively rare; however, it is a significant reversal indicator. It is comprised of three Dojis. The three-day period illustrates indecision of a period of days.

Criteria

• All three days are Dojis.
• The middle day gaps above or below the first and third day. The length of the shadow should not be excessively long, especially when viewed at the end of a bullish trend.

Signal Enhancements

• The greater the gap, away from the previous day's close, sets up for a stronger reversal move.
• Large volume on one of the signal days increases the chances that a significant reversal is taking place.

Pattern Psychology

After an uptrend or a downtrend has been in effect, the appearance of the first Doji reveals that there is now indecision in the bull's and the bear's camp. The next day gaps in the same direction as the existing trend and forms the second Doji. This reveals that no certainty for either direction has become apparent. The third day opens opposite the previous trends direction and forms another Doji that day. The final Doji is the last gasp. Any investors who had any conviction are now reversing their position. Because of the rarity of this pattern, double-check the data source to confirm that the Dojis are not bad data. (See Figure 2.50.)