What does the three white soldiers pattern mean?

The three white soldiers pattern and its bearish counterpart, the three black crows, are considered fairly robust reversal signals by both analysts and traders. The bullish pattern consists of three consecutive long-bodied candlesticks that open within the previous candle's real body and a close that exceeds the previous candle's high.

Typically occurring at the end of a downtrend, the three white soldiers consists of three large bullish candles, each closing higher than the last. However, there should be no gaps between candles – each candle opens within the body of the one preceding it.

In addition, the upper wicks are short or non-existent, indicating that bulls managed to keep the price of the security near the height of its range for the period. The wide trading range reflected in the large bodies of all three candles and the lack of any substantial upper shadow indicates the strength of bullish momentum. As with any reversal pattern, an expansion on volume accompanying the three white soldiers lends additional strength to the signal.

While the three white soldiers typically appear at the end of a bearish trend, it can also appear after a period of consolidation, though this is not considered a strong bullish signal. In addition, it is possible for this pattern to be almost too robust. A series of three bullish candles that are extremely large can indicate that the bullish opposition has overextended itself by pushing too hard too quickly.

Because of this potential ambiguity, it is important to look for additional chart confirmation of the bullish reversal. Additional bullish price action is always the best confirmation, but solid volume in subsequent sessions and proximity to a support level also strengthens the signal.