Three Mountains and Three Rivers patterns are complex figures of a Japanese Candlesticks Analysis. Unlike most patterns, they consist of a large quantity of candles.
Three Mountains and Three Buddha
In Japanese Candlesticks Analysis, as well as in the Western techniques, the triple top pattern stands out, called Three Mountains model. This model plays an important role as a reversal sign. Three Mountains pattern forms when the price rebounds three times from resistant level. Bearish model (for example Doji or Dark-Cloud Cover) confirms the peak of the last mountain. If the model has an average peak as the highest, then such model has a name, Three Buddha. Such name comes from a tradition of placing two small Buddha figures on the sides of the big one. Three Buddha is an analog of Western Head and Shoulders. Japanese version, Three Buddha, were described almost a hundred years earlier than Head and Shoulders. It is noteworthy that in the East and the West the same pattern was described as the strongest reversal sign.
Three Rivers and Reversed Three Buddha
In stark contrast to the Three Mountains pattern is Three Rivers formation. This figure appears when the price three times rebounds from support level. Reversal signal is considered confirmed when the prices are rising over the median of the model. When the central peak of the Three Rivers model are the lowest, the model called Reversed Three Buddha.
The importance of the number three in Japan Analysis Candles
Japanese analysts exaggerated attention to the triple top and triple grounds, possibly due to the significant role that number three playing in Japanese culture. Western culture does not attach much importance to the triple peaks among double or multiple peaks structures. Indeed, a lot of patterns in the Japanese Candlestick Analysis based on the number three.
“Interestingly, how often the number three is found in the technical analysis and how important role it plays. For example, Gann Fan analysis is based on the three lines; bearish and bullish trends have three phases of development, according to Dou and Elliot theories.
There are three types of price gap; some famous reversal models like Three Peaks and Head and Shoulders has three in the root.
There are three basic types of tendencies power: basic, intermediate and low; and three kinds of direction: uptrend, downtrend and stagnating. Among the most popular continuation patterns, there are three types of triangles: symmetrical, upward and downward. The technical analyst has three primary inputs: price, volume, and open interest. Whatever the reason, but the number three plays a major role in every aspect of the technical analysis.” – John Murphy “Technical analysis of the futures markets.”