In addition to the trend reversal patterns that take three days to develop, there are also a handful of three-day trending patterns. These patterns usually include a long white candle followed by a gap of some sort. Generally, the gap or the low of the first day of the pattern may serve as a useful support level to let you know when the prevailing trend is still intact.
Three-day patterns have three uses for traders as follows:
If you’re considering buying a stock but hate to pay up when the price has been rising, three-day bullish trending patterns can give you confidence that the price you pay is as good as the price is going to be for a while.
If you’re interested in shorting, a three-day bullish trending pattern can tell you when to hold off for just a little longer to allow for the trend to provide you with a better price to use in your trade.
If you’re shorting a stock, a three-day bullish trending pattern can tell you that it’s time to buy back and move on, because the trend definitely isn’t your friend.
In this section I describe a number of three-stick trending patterns and how you can incorporate them in your trading ...