Trend after black three soldiers: Will it continue to fall?

The black three soldiers pattern signals potential bearish reversal in crypto markets, especially when confirmed by volume and technical indicators like RSI or MACD.

Jun 13, 2025 at 11:43 pm

Understanding the Black Three Soldiers Candlestick Pattern

The black three soldiers is a well-known candlestick pattern in technical analysis, particularly used by traders to identify potential bearish reversals. It typically appears at the end of an uptrend and consists of three consecutive long red (or black) candles, each opening within the range of the previous candle and closing lower than the prior one. This pattern indicates strong selling pressure and suggests that bears are taking control of the market.

When analyzing this pattern, it's crucial to pay attention to the size of the candles and their wicks. If the candles are large with minimal upper or lower shadows, it reinforces the strength of the sell-off. Conversely, if there are long tails or hammers present, it might suggest hesitation among sellers and could weaken the reliability of the signal.

Historical Behavior After the Formation of Black Three Soldiers

In historical price data across various cryptocurrency pairs such as BTC/USDT, ETH/USDT, and others, the black three soldiers pattern has often preceded further declines. However, this is not always the case. The effectiveness of the pattern depends heavily on the broader market context, including volume, momentum indicators, and overall sentiment.

For instance, during periods of extreme bullishness followed by a sharp reversal, the appearance of black three soldiers may indicate a strong likelihood of continued downside movement. On the other hand, if the pattern forms during a sideways consolidation phase, its predictive value diminishes significantly.

Volume plays a key role here. A valid black three soldiers formation should ideally be accompanied by increasing trading volume on each candle. This confirms that the selling is aggressive and widespread, reinforcing the bearish outlook.

Technical Indicators That Confirm or Contradict the Pattern

To assess whether the downtrend will continue after the black three soldiers, traders often combine the candlestick pattern with other technical tools. Among the most popular are:

• Relative Strength Index (RSI): If RSI drops below 30 after the formation, it signals oversold conditions and potential for a bounce. However, if RSI remains between 40 and 50, it supports the continuation of the downtrend.
• Moving Averages: When the price closes below key moving averages like the 50-day or 200-day SMA, it strengthens the bearish case.
• MACD (Moving Average Convergence Divergence): A bearish crossover in the MACD line after the pattern adds confirmation to the downtrend.

These indicators should be analyzed alongside the black three soldiers to increase the probability of accurate predictions.

How to Trade the Black Three Soldiers in Cryptocurrency Markets

Trading based on the black three soldiers requires a clear strategy and risk management plan. Here’s how experienced traders approach it:

• Entry Point: Wait for the third red candle to close before considering an entry. Some traders wait for a fourth bearish candle to confirm the trend continuation.
• Stop Loss: Place a stop loss above the high of the first red candle. This ensures limited losses if the pattern fails.
• Take Profit Levels: Use Fibonacci retracement levels or recent swing lows to set profit targets. Alternatively, trail your stop under new swing lows as the downtrend progresses.

It’s also important to monitor order book depth and liquidity around support zones. If the price approaches a major support level with thin order books, a breakdown is more likely.

Common Misinterpretations and Pitfalls to Avoid

One of the most common mistakes traders make is assuming that the black three soldiers always leads to a significant downtrend. In reality, the pattern can appear during minor corrections within a larger uptrend. Traders who short aggressively without confirming the broader trend may find themselves caught in a false move.

Another pitfall is ignoring divergences in momentum indicators. Even if the black three soldiers forms, if the RSI or MACD shows divergence — for example, higher lows while price makes lower lows — it could signal an upcoming reversal.

Lastly, many traders fail to consider the timeframe they’re analyzing. A black three soldiers on a daily chart carries more weight than one formed on a 1-hour chart. Always align your interpretation with the dominant trend on higher timeframes.

Frequently Asked Questions (FAQ)

Q: Can the black three soldiers appear in a downtrend?

A: Yes, although it's less common. In a downtrend, the black three soldiers may act as a continuation pattern rather than a reversal. Confirmation from volume and other indicators becomes even more critical in such cases.

Q: How reliable is the black three soldiers in cryptocurrency markets compared to traditional markets?

A: Cryptocurrencies are known for high volatility and emotional trading, which can lead to stronger and more frequent candlestick patterns. However, due to the lack of regulation and influence of whale activities, the reliability of the pattern may vary. Combining it with volume and other indicators improves accuracy.

Q: What should I do if the black three soldiers is followed by a bullish engulfing candle?

A: A bullish engulfing candle immediately after the black three soldiers suggests strong buying pressure and may invalidate the bearish signal. At this point, traders should reassess the trend and possibly close short positions or avoid entering new ones until clarity returns.

Q: Are there any cryptocurrencies where the black three soldiers works better than others?

A: The effectiveness of the pattern isn't necessarily tied to specific cryptocurrencies but rather to market conditions. However, major coins like Bitcoin and Ethereum tend to exhibit more predictable behavior due to higher liquidity and institutional participation, making candlestick patterns like the black three soldiers more reliable.