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Bruce_L
 Posted : Wednesday, September 27, 2017 12:12:41 PM

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Joined: 10/7/2004
Posts: 65,138

Three Stars in the South is a three candle long bullish reversal pattern.

The first candle is a long black candle with no upper wick and a long lower wick. No attempt is made to define long in the following.

`L2 < C2 AND C2 < O2 AND O2 = H2`

The second candle is a similar shorter black candle with a smaller body and higher low than the first candle.

`L2 < L1 AND C1 < O1 AND AND O1 - C1 < O2 - C2 AND H1 - L1 < H2 - L2`

The third candle is either a black marubozu or doji with the high equal to the low. The candle falls entirely in the range of the second candle.

`L1 <= L AND L = C AND (C < O OR L = H) AND O = H AND H <= H1`

The pattern forms in a downtrend. The following formula defines the downtrend as a negative 10 period linear regression slope and net change over the same span as the linear regression.

`FAVGC10 < AVGC10 AND C < C9`

Putting it all together results in the following.

`L2 < L1 AND L1 <= L AND L = C AND (C < O OR L = H) AND O = H AND H <= H1 AND C1 < O1 AND O1 - C1 < O2 - C2 AND H1 - L1 < H2 - L2 AND L2 < C2 AND C2 < O2 AND O2 = H2 AND FAVGC10 < AVGC10 AND C < C9`

The pattern seems quite rare even with the relatively relaxed requirements given above. As of the time of this post, it was only true 153 times total in the last 450 trading days for all of the symbols in the US Common Stocks WatchList.

-Bruce
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Al_Gorithm
 Posted : Wednesday, September 27, 2017 12:37:26 PM

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Joined: 6/30/2017
Posts: 1,227

Confused. (Not uncommon for me :) ... not used to seeing you lead off a post. Is this a response to a question, or the start of your candle tutorial?

Bruce_L
 Posted : Wednesday, September 27, 2017 12:55:50 PM

Worden Trainer

Joined: 10/7/2004
Posts: 65,138

It is kind of a start to a candlestick tutorial in a place where others can comment on and possibly improve the formula before I actually commit the patterns to the TC2000 Help Site (no patterns are posted there yet).

You will see I did something similar with all of the linked topic in Indicator Formula Templates.

I am probably just going to start by going through the patterns in the Boolean PCFs for Candlestick Patterns topic and re-writing them. Hopefully most changes will just be to put the formulas into a more understandable (at least to me) format and possibly eliminate decimal markers.

That said, some changes will be substantive. I started with Three Stars in the South because raider45 asked about it and because the current formulas just return true for any symbols even when looking back almost two years.

Bulkowsk indicates the pattern is incredibly rare, so maybe the formula in the Boolean PCFs for Candlestick Patterns topic currently is just fine. It actually does try to check for the first and second bodies being long (when defined as being more than half the candle).

`C2 < O2 AND ABS(C2 - O2) > .5 * (H2 - L2) AND C2 - L2 > O2 - C2 AND C1 < O1 AND ABS(C1 - O1) > .5 * (H1 - L1) AND C1 - L1 > O1 - C1 AND H1 - L1 < H2 - L2 AND L1 > L2 AND O = H AND C = L AND H < H1 AND L > L1`

Some of the other requirements to not seem to match up with the definitions I found on two different sites however. This to me is not even remotely surprising in that I generally find disagreement about the definitions of various candlestick patterns to be quite common when checking a variety of websites.

-Bruce
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Al_Gorithm
 Posted : Wednesday, September 27, 2017 1:07:30 PM

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Joined: 6/30/2017
Posts: 1,227

Cool. We can call it "Candlesticks: Best of Bruce!"

Kidding.

Not sure this is your style, or intention, but a graphic example of each pattern would go a long ways education-wise. A TC2000 screen grab would be perfect, since, well, this is a TC2000 site :)

Personally, the names mean nothing to me. They are usually good for a laugh, though ("Abandoned Baby!!"). What helps me when I'm learning candlestick patterns is to see an example and examining the price action involved. That'll tell me the whether I'd be interested in pursuing the pattern further.

Of course, if this is going to be more a reference than a tutorial, maybe the graphic examples might be overkill. Or not.

Just a thought.

Al_Gorithm
 Posted : Wednesday, September 27, 2017 1:11:58 PM

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Joined: 6/30/2017
Posts: 1,227

And yeah, I've looked at candle patterns ... a little, not a lot ... and different sources seem to have different takes on what constitutes a particular pattern. Not like there's a governing body setting standards.

But that's okay .. I'm guessing your work will challenge Bulkowski as one of the seminal resources for candle patterns. :)

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