The Pattern is viewed as a reversal pattern, usually occuring at the bottom of a downtrend. The pattern consists of three candlesticks:
Large Candle (Day 1)
Small or Candle (Day 2)
Large Candle (Day 3)
The first part of a reversal pattern is a large red candle. On the first day, bears are definitely in charge, usually making new lows.
The second day begins with a gap down. It is clear from the opening of Day 2 that bears are in control. However, bears do not push prices much lower. The on Day 2 is quite small and can be , , or neutral (i.e. ).
Generally speaking, a candle on Day 2 is viewed as a stronger sign of an impending reversal. But it is Day 3 that holds the most significance.
Day 3 begins with a gap up, and bulls are able to press prices even further upward, often eliminating the losses seen on Day 1.