Two Yangs and one Yin on the quarterly line: Long-term bullish signal confirmed?

The "Two Yangs and One Yin" candlestick pattern on quarterly charts may signal a bullish reversal, especially in crypto markets, but requires confirmation from volume, RSI, or MACD.

Jun 12, 2025 at 07:00 am

Understanding the "Two Yangs and One Yin" Candlestick Pattern

In technical analysis, candlestick patterns play a pivotal role in identifying potential market reversals or continuations. The "Two Yangs and One Yin" pattern is one such formation that traders often observe on longer timeframes like the quarterly chart. This pattern consists of two bullish (Yang) candles followed by a bearish (Yin) candle. In traditional Japanese candlestick terminology, Yang represents strength and upward momentum, while Yin symbolizes weakness or downward pressure.

When this pattern appears on the quarterly line, it suggests a possible shift in sentiment from bearish to bullish. The presence of two consecutive strong bullish candles indicates consistent buying pressure. The subsequent bearish candle may reflect short-term profit-taking or hesitation among traders. However, since the overall structure remains supported by previous gains, many analysts interpret this as a sign of long-term accumulation rather than reversal.

Important:

It's crucial not to view this pattern in isolation. Traders should combine it with other indicators such as volume, moving averages, and trendlines for confirmation.

How to Identify Two Yangs and One Yin on Quarterly Charts

To correctly identify this pattern on the quarterly chart, several criteria must be met:

• The first candle must be a clear bullish candle, showing strong buying pressure throughout the quarter.
• The second candle should also close higher, ideally with similar or increased volume compared to the first.
• The third candle is bearish, but its closing price should remain above the midpoint of the second candle’s body.

This configuration implies that even though there was a pullback, the bulls are still in control. The quarterly timeframe makes this setup particularly significant because it filters out much of the noise seen on shorter intervals.

Traders often look for additional signs such as:

• Volume contraction during the bearish candle
• Support levels holding near the lows of the Yin candle

Historical Examples in Cryptocurrency Markets

Cryptocurrency markets, known for their volatility and cyclical behavior, have provided multiple instances where the "Two Yangs and One Yin" pattern appeared on the quarterly chart before a major rally. For example, Bitcoin displayed this pattern in Q2–Q4 of 2019, which preceded a substantial bull run starting in 2020.

Ethereum also showed a similar pattern in late 2020, just before its breakout above $1,500 and later $2,000. These examples demonstrate how the pattern can serve as an early indicator of institutional interest and macro-level confidence returning to the market.

However, it's important to note:

• Not every occurrence leads to a rally; sometimes, the pattern gets invalidated by a breakdown below the Yin candle’s low.
• Market fundamentals and external factors like regulatory news or macroeconomic shifts can override technical signals.

Combining with Other Indicators for Confirmation

Relying solely on candlestick patterns can be risky, especially in crypto, where sudden volatility can distort traditional setups. To strengthen the validity of the "Two Yangs and One Yin" signal, traders often use complementary tools:

• Relative Strength Index (RSI): A reading above 50 after a prolonged downtrend suggests growing bullish momentum.
• MACD crossover: A bullish MACD cross above the signal line reinforces the idea of strengthening buyer dominance.
• Volume analysis: A sharp decline in selling volume during the Yin candle confirms weak bearish conviction.

Moreover, observing the broader market context is essential. If altcoins also begin forming similar patterns, it could indicate a sector-wide recovery rather than an isolated event.

Risks and Limitations of the Pattern

Despite its usefulness, the "Two Yangs and One Yin" pattern has limitations that traders must consider:

• False signals are common, especially when the market lacks clear direction or is range-bound.
• Liquidity conditions in crypto can distort candle formations, making it harder to interpret accurately.
• Quarterly data is sparse, so waiting for confirmation across lower timeframes may delay entry opportunities.

Additionally, emotional trading based purely on candlestick patterns without proper risk management can lead to losses. Setting stop-loss orders below key support levels and managing position sizes is critical when acting on such signals.

Frequently Asked Questions

What timeframes are best suited for analyzing the Two Yangs and One Yin pattern?

While the pattern can appear on any timeframe, the quarterly chart offers more reliable insights due to its reduced sensitivity to short-term volatility. Daily or weekly charts can be used for entry confirmation once the quarterly setup is identified.

Can this pattern occur in bear markets?

Yes, it can appear during bear markets, but its reliability diminishes unless accompanied by increasing volume and positive divergence in oscillators like RSI or MACD. Bear market rallies often mimic bullish signals, so extra caution is needed.

Is the Two Yangs and One Yin pattern applicable to altcoins?

Absolutely. Many altcoins follow Bitcoin's trend and often exhibit similar candlestick structures. However, low-cap coins may produce misleading signals due to thin order books and manipulative price action.

Should I enter immediately after the pattern completes?

It’s generally safer to wait for a confirmation candle following the Yin candle. Entering too early increases exposure to false breakouts, especially if the price fails to hold above the Yin candle’s midpoint.