Candlestick Basics   Candlestick Bullish   Candlestick Bearish

Related Tutorial On Technical Analysis

Abandoned Baby BearishBearish EngulfingBearish HaramiDark Cloud CoverDragon Fly Doji
Evening Doji StarEvening StarGravestone DojiHanging ManShooting Star
Three Black CrowsThree Outside DownBearish Kicker  

Tutorial on Three Outside Down Candlestick Chart Pattern


What is Three Outside Down Candlestick Chart Pattern?

Three Outside Down Candlestick Chart Pattern is a bearish trend reversal pattern of strong reliability. It is formed at an uptrend or at a possible resistance. This pattern is just opposite of the Three Outside Up Pattern. This pattern is a three day candlestick pattern or one can say it takes three days for this pattern to be formed. If see deeply into the pattern, its a further extension of Bearish Engulfing Candlestick pattern or its a confirmation of Bullish Engulfing Pattern.
Day 1: On first day, On day one a small bullish candlestick is formed, which is mere a n the continuation of the uptrend, as shown in the Figure.
Day 2: On the second day a larger bearish candlestick is formed such that the body of the bearish candlestick completely overshadows or engulf the body of the bullish candlestick formed on Day 1. as shown in the Figure.
Day 3: On third day again a bearish candlestick is formed which closes below than the second day candlestick.

For this pattern to be formed it is extremely important:
a. The pattern should be formed in an uptrend.
b. The open price of the Day 2 candlestick is higher than the close price of Day 1 candlestick.
c. The close price of the Day 2 candlestick is lower than the open price of Day 1 candlestick.
d. The close price of the Day 3 candlestick is lower than the close price of Day 2 candlestick.

The strength of this pattern is increased by the size of the engulfing candlestick. The bigger the engulfing candlestick the more significant is the pattern. The first day the small bullish candle may looks like a continuation of an uptrend but its small size shows that the bullish signal is weakening. This is confirmed by the long bearish candlestick formed the next day. The larger bearish candlestick tells a lot more about the market sentiments that the bears is taking over the bulls and hence there is an decrease in price movement.

Three Outside Down Candlestick Chart Pattern by itself is a confirmed chart pattern but one has to see the overall market and other technical indicators for its strength and reliability.

On combining this pattern with any other technical indicators like Volume, Stochastic, RSI, MACD etc., further confirms this pattern and one can quickly pick up the trend change or the sell signal. For example evidence of higher volume on the second and third day further strengthen this pattern reliability. Similarly a price gap down the next day (Day 3) support further, this pattern of trend reversal.

Now we have learnt what is Three Outside Down Candlestick Chart Pattern, it is the time to see them in real life. Our website provides free Stock screening based on Three Outside Down. It can be found at this link

Corresponding Patterns of Three Outside Down Candlestick Chart Pattern is as follows:
1. Bearish Engulfing
2. Three Outside Up

Example of Three Outside Down Chart Pattern

Next



Our website provides free Stock screening based on Different Bearish Candlestick Pattern. It can be found at:

Related Technical Stock Screener

Abandoned Baby BearishBearish EngulfingBearish HaramiDark Cloud Cover
Dragon Fly DojiEvening Doji StarEvening StarHanging Man
Three Black CrowsThree Outside DownThree Inside Down 
Abandoned Baby BearishBearish EngulfingBearish HaramiDark Cloud Cover
Dragon Fly DojiEvening Doji StarEvening StarHanging Man
Three Black CrowsThree Outside DownThree Inside Down 

Go to the Top




Be the first to comment

(All analysis is based on End of Trade day's Value. Expected time of update is between 5 to 5.30 PM exchange time Zone)

All Rights Reserved By Mintnovate Market Research Pvt Ltd.