Tri-Star

The Tri-Star is a trend reversal pattern composed of three Dojis.

It is a very uncommon but powerful pattern.

It is significant on time units that are superior to 30 min and on liquid markets.

Its characteristics are as follows:

• The tri-star appears on a top or a bottom.

• The 1st candlestick is a Doji (or almost one).

• The 2nd candlestick is a Doji Star, that is to say a Doji with a gap between this and the previous one and this and the next one.

• The 3rd candlestick is a Doji (or almost one)

On this chart, the Tri-Star formed at the top. Such a pattern occurs when a 1st Doji appears after an uptrend which already shows that the rise is running out of steam. The day after, prices open gap up but another Doji appears that can lead us to think that the gap was generated by the last latecomers and that we are now close to reaching a top.

During the next session, prices open gap down and close lower. We should ideally see a 3rd Doji but other versions of the perfect pattern are also acceptable. Prices then flow back quite rapidly at 4000 pts and resistance zone appears around the star in the Tri-Star.

Regardless of the quality of the first two Dojis, it is wiser to wait for the pattern to be confirmed by the next Japanese candlestick that should open lower is one wishes to short at the next opening.

The invalidation threshold can be placed either above the highest point of the pattern or according to the Thirds Rule, depending on the stakeholder’s investment intentions.

The same goes for a Bottom Tri-Star that would appear after a downtrend, the invalidation threshold can then be placed either below the lowest point of the pattern or according to the Thirds Rule, depending on the stakeholder’s investment intentions.

Moreover, it is interesting to observe both reversal patterns and support and resistance lines. The Top Tri-Star has formed on the same level as the previous top which has created a double-top and has reinforced the pattern.