The 3 Stars in the South candlestick pattern is a three candle bullish reversal pattern with an astounding 86% accuracy.
So what’s the downside? You probably won’t find this candlestick formation on larger time frames, and even on smaller time frames this pattern can be hard to find.
The problem with this candle is that while it can be incredibly accurate, in the end it’s a crap shoot due to the fact that even Bulkowski was able to find only 9 of these patterns in his testing.
This patterns consists of three bearish candles with each successive candle forming a lower close and lower low.
The first bearish candle is large and should have a long lower wick.
The second candle should be smaller than the first with a lower close but a higher low.
The third and final candle should be a bearish Marubozu that opens within the body of the second candle and proceeds downward to form a lower close. Since the third candle is a Marubozu it should have practically no upper or lower wick.
Now you see why the 3 Stars in the South candlestick pattern is so hard to find: it has strict requirements that need to be followed to the t for a reliable signal.
Luckily, out of all candlestick formations Bulkowski tested, this pattern has the single best reversal rate over other patterns, so its reliability should be remembered and not forgotten.