1992issue C031-12
A three-count drill that binds candlesticks, head and shoulders, and entry rules
A classroom reading treats a candlestick signal as valid only after single-candle and multicandle forms are identified and read against one another. Those clusters are then bound to a three-mountain head-and-shoulders analog and a three-methods rule that classifies activity as buying, selling, or resting on 1991 and 1992 futures charts.
- A candlestick signal is treated as valid only after single-candle and multicandle formations have been identified and read against one another.
- A three-gap is read as exhaustion or weakness, three-parallel-lines are the more common continuation cluster, and three-rivers mark a contested support or resistance zone.
- Three-mountains are treated as the candlestick counterpart of a head-and-shoulders formation, with prices rising and falling through three steps or levels.
- Three-methods classifies activity as buying, selling, or resting, so rule-based-entry keeps entry, exit, and abstention in one procedure.
Read single-candle and multicandle forms together
The archive workflow treats a candlestick signal as valid only after single-candle and multicandle formations have been identified and read against one another. The classroom drill then keeps those clusters inside one sequence with a three-mountain analog of a head-and-shoulders formation and a three-methods rule that classifies activity as buying, selling, or resting.
The flagship-candle is the lead candle that completes a three-count cluster and gives the local formation its character. Until that lead candle is placed against the rest of the group, the reading is incomplete.
Three-gap clusters as exhaustion
A three-gap is three black or three white candles that gap away from each other. It is read as a sign of exhaustion or weakness in the current trend.
On a daily October 1991 live-cattle chart, a bullish black three-gap with an inverted-hammer flagship-candle was dated August 8, 1991, after a decline of almost 7 cents.
A bearish white three-gap with a white-star flagship-candle was dated April 22, 1991 on the U.S. dollar after a long advance from the low 80-cent area and was read as trend exhaustion.
Three-parallel-lines as continuation
Three same-color candles that do not gap form the three-parallel-lines group. This group is more common than the three-gap group and is traditionally read as trend continuation, though an early-trend appearance can also mark strong momentum.
A three-crow cluster dated October 4, 1991 on a daily March 1992 S&P 500 chart was read as continuation of a still-bearish tendency. A three-white-soldier cluster dated November 11, 1991 on a daily February 1992 live-cattle chart was read as continuation of a bullish trend.
Three-rivers at a contested zone
Three-rivers is a reversal family that includes morning-star and evening-star forms plus a three-river bottom. It is used to mark a contested support or resistance zone.
A three-river morning black doji star dated November 11, 1991 on a daily January 1992 platinum chart was read as marking support and a bottom.
Three-mountains as a head-and-shoulders analog
The three-mountain group is treated as analogous to a Western head-and-shoulders formation. Prices are described as rising and falling in a series of three steps or levels.
In the classroom sequence, that three-peak analog is not a separate chart call. It is the larger structure against which a completed three-count cluster is read.
Buying, selling, or resting as one procedure
Three-methods classifies activity as buying, selling, or resting, so entry, exit, and abstention are one procedure rather than separate discretionary choices. That is the archive form of rule-based-entry.
The accompanying rule set uses prior price history, a 100-bag scale-in trigger after a rise from a low or a fall from a high, a 40-to-50-day sideline after a recognized error, and liquidation of 70% to 80% of a profitable position.
An editorial binding of the three counts
An editorial reading of this archive workflow is that the three counts are one falsifiable classroom procedure. The chart first has to show a valid cluster, then a three-step structure if a head-and-shoulders analog is in play, and then a buy, sell, or rest decision that can be checked against the same rule set.
That framing is editorial. It is not an archive claim about later markets, and it does not convert the historical chart notes into a present-day instruction to trade.
All readings on this track · 37 readings
- 1982Head and shoulders as a three-path completion test
- 1984Stock low clusters as a cycle baseline
- 1985Four-phase construction of the head-and-shoulders reversal
- 1989Volume-confirmed reversal patterns, stops, and measured objectives
- 1991The journal as one checklist for taken and skipped trades
- 1991Head and shoulders as a direction hypothesis
- 1991Candlestick body and shadow construction with three-Buddha peaks
- 1992A three-count drill that binds candlesticks, head and shoulders, and entry rules
- 1997Constructing bump and run reversal channels
- 1998Testing reversal formations in bond futures
- 1999Construction first: extra shoulders, the neckline, and the diamond test
- 1999Dead-cat bounce, rollover, and failed reversals
- 1999Evaluating time gaps in bond reversal patterns
- 2000Constructing head and shoulders and double reversal patterns
- 2001Constructing broadening and complex bottoms
- 2001Constructing a slanted head-and-shoulders when the chart is tilted
- 2002Head and shoulders with dominant-cycle timing
- 2002Trendline breaks, right shoulders, and trailing stops
- 2003Confirmation tests for bearish top patterns
- 2003Commodity top hypotheses on a dollar rebound
- 2003A head-and-shoulders test during a bear rally
- 2004Pattern breakouts need a primary-trend filter
- 2004Reading candlestick closes on trendline and neckline tests
- 2004Candle diagnosis needs Western targets and stops
- 2004Head-and-shoulders neckline construction
- 2005A familiar chart condition is a hypothesis, not a completed decision
- 2005A 50-day ceiling and a rising-floor stalemate
- 2006A complete trading plan from philosophy to checklist
- 2006Thin-market head and shoulders with two averages and MACD confirmation
- 2010Head and shoulders as a playback-tested setup
- 2011Turning a head-and-shoulders outline into a breakout hypothesis
- 2011Volume-confirmed head and shoulders on AIG and Citigroup in 2007
- 2013Constructing head-and-shoulders milestone points
- 2013Head-and-shoulders geometry versus the filter stack
- 2013Algorithmic head-and-shoulders construction
- 2018International relative strength as a double-top case study
- 2019Structure invalidation before comfort-stops