Three White Soldiers

  • July 2, 2001
  • Eddie Kwong

The Airline Index was
one of the top-performing stock sectors of the last week. As you can
see on its daily chart below, the index staged a powerful three-day rally and
looks poised to continue higher on Monday’s session. 

Now let’s take a look at one of the component issues, UAL Corp (UAL).
The daily chart below almost looks identical to the Airline Index. UAL made a
strong three-day advance and closed just below its 50-day moving average Friday.
The stock also appears to be forming a double bottom. 

Is UAL ending its downtrend? Let me give you a clue. If you look at the
Airline Index again, it exhibits a picture-perfect example of the three white
soldiers — a bullish reversal candlestick pattern. Often after a prolonged
period of downward movement, a stock can reverse its direction by forming three
consecutive wide-range bars. UAL did not form a perfect three white soldiers,
but it may get enough help from the index. Let’s wait and see.

Eddie