Theory behind 3 Valley strategy...
1. The three rising valleys pattern is preceded by an uptrend usually, but can be preceded by a downtrend as well, and the pattern itself suggests a break further to the upside.
2. There are three valleys, the second valley's low price is higher than the first valley's low, and the third valley's low is higher than the second valley's low.
3. The valleys should be fairly similar in width.
4. The suggested buy signal is triggered when prices close above the high price established by the peak between the second and third valleys.
Averaged maximum gain before a 20% retracement is 41%; and that prices pullback to the breakout signal price within 30 days 60% of the time.
The market psychology of the pattern is as follows: A significant trait of an uptrend is that the trend makes higher highs and higher lows. The second peak in pattern is a higher high. The second valley after the first peak is a higher low. The definition of a new uptrend is complete. The second peak is a higher high which confirms the uptrend. Once prices break above the second peak high, traders buy expecting that the next peak will be a higher high thus confirming the uptrend yet again.
As we know every stock is different and have different story. not every time u get the exact pattern.
So, one should wait for pullback as RSI indicates overbought or buy @ CMP & accumulate on dips..