Three Outside Up / Down

Three Outside Up and Three Outside Down

Sources:  TradingPedia.com

The Three Outside Up and Down are another set of trend-reversal patterns, consisting of three candlesticks, with the Up being the bullish and the Down the bearish one.

The Three Outside Up pattern occurs at market bottoms. Its first candle is a bearish (matching the recent price movement) spinning top, while the second candle is large and bullish and engulfs the first one. You can see it visualized below.

4. Three Outside

Just like the Three Inside Up pattern starts with a Harami, the Three Outside Up begins with an Engulfing. The pattern is then completed with the plotting of a third bullish candle, which closes above the second one and hits a new high thatextends above the Engulfing patterns high.

Generally this pattern is considered as less reliable than the rest because outside candles/bars are less predictable and profitable than inside ones, like the Morning and Evening Stars and Three Inside Up and Down. This is because volatility has already risen in the beginning of the pattern (after the first candle) and is susceptible to a contraction much sooner than in the other patterns.

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