Rising Three Methods Bullish Candlestick Continuation Pattern
The bullish rising three methods is a five candlestick bullish continuation pattern. The first candlestick is a large bullish candlestick that takes place during an uptrend. Then a group of two to four small body candlesticks (either bullish or bearish) retreat within the price range established by the first day’s real body bullish candlestick. The final candlestick of the pattern is another large bullish candlestick that closes above the first day’s closing price. Technically, the last day’s bullish candlestick should gap up above the close of the previous day’s small candlestick. Nison (1991, p. 137) suggests that a bullish rising three methods pattern is more significant if the volume on the first day’s bullish candlestick and the last day’s bullish candlestick have higher volume than the middle days’ small candlesticks.

Falling Three Methods Bearish Candlestick Continuation Pattern
The bearish falling three methods is a five candlestick bearish continuation pattern. The first candlestick is a large bearish candlestick that takes place during a downtrend. Then a group of two to four small body candlesticks (either bullish or bearish) slowly ascend within the price range established by the first day’s real body bearish candlestick. The final candlestick of the pattern is another large bearish candlestick that closes below the first day’s closing price. The last day’s bearish candlestick should gap down below the close of the previous day’s small candlestick. Nison (1991, p. 137) advocates that a bearish falling three methods pattern is more significant if the volume on the first day’s bearish candlestick and the last day’s bearish candlestick have higher volume than the middle days’ small candlesticks volume.

Rising Three Methods Candlestick Chart Example
The chart above of Google (GOOG) illustrates a bullish rising three methods continuation pattern. The first day is a large bullish candlestick. The second day is a small spinning top that closes within the real body of the first day’s bullish candlestick. The third day is another small spinning top that is lower than the previous day’s real body. The fourth day is a small doji and it also closes within the real body of the first day. The fifth day of the pattern is a large bullish candlestick that opens above the close of the fourth day’s doji and ends the day having closed above the close of the first day’s bullish candlestick. The chart of Google proceeds to continue its previous trend higher.

Rising Three Methods with Volume Example
The chart above of Exxon Mobil (XOM) illustrates how volume on the first and last day’s bullish candlestick being higher than the volume of the middle day’s candlesticks suggests that the rising three methods pattern had validity. The lower volume on the middle small bearish candlesticks suggests that the market was just resting before the next day’s higher volume large bullish candlestick.

Falling Three Methods Candlestick Chart Example
The chart above of 3M (MMM) shows a falling three methods bearish continuation pattern. Notice how the large bearish candlestick broke below the lows of the previous small candlesticks’ consolidation area and made a new low. Following the large bearish candlestick, three bullish small candlesticks, all closing within the first day’s real body, appeared. The final day of the pattern was a large bearish candlestick that opened below the close of the previous day’s candlestick and ended the day with a close below the close of the first day’s bearish candlestick.

Works Referenced
  • Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
  • Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
  • Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
  • Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
  • ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.

Source : FinVids.com