The next bullish reversal pattern that we are going to discuss, consists of three Japanese candlesticks. It forms at the end of a downtrend or near a support area.

The first candle is a long white candle in the opposite direction of the established trend. This is enough to raise an eyebrow not to mention a warning for an impending reversal.

The second candle is also long and white. Ideally, it opens within the real body of the previous candle.

Similarly, the third candle is long and has a white real body. You see, the three consecutive white candles indicate the decisiveness of the bulls to pull the prices higher. I am sure you agree with me.

Now, it’s a good time to list the specifications of the Three White Soldiers:

1. The first candle is a long white real body at the end of a downtrend.
2. The second candle is also a long white body that opens within the body of the previous candle.
3. The third candle is a long white real body that also opens within the body of the previous candle.
4. The close price should be near the high or at the high price.
5. The upper shadow should be very small or not present at all.

What about any potential sell setups? Well, a potential buy order may be placed just above the high of the pattern, that is above the third candle. As you might have guessed we need to place a protective stop loss.

So far, the stop loss was placed right below the low of the bullish pattern. But don’t you think that is too risky? Maybe too far away from the entry-level? Perhaps a better idea would be to place a stop loss below the second candle instead.

The choice is yours. See you in a while.