Charting The Markets: Three Methods

Continuation Candlestick Patterns

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In contrast to reverse candlestick patterns, continuation candlestick patterns indicate the strength of the current market trend, and they might hint towards a possible continuation of a given trend. When learning about these patterns, please keep in mind that most of these patterns require a concrete confirmation in the form of a subsequent candlestick. 

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The most popular and widely recognized continuation candlestick patterns are: 

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• Marubozu
• Three White Soldiers & Three Black Crows 
• Three-Line Strike
• Falling Three Methods & Rising Three Methods
• Mat Hold
• Upside & Downside Tasuki Gap

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Today, we will be discussing the rising and falling three methods – one of the market patterns you will be seeing rather often. 

‍Rising & Falling Three Methods

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This market pattern is the first pattern that consists of 5 subsequent candlesticks. This pattern is very important, as it indicates that the sellers or buyers (depending on whether the pattern is bullish or bearish) are still in the game and do not want to allow for a market shift to take place. The Rising & Falling Three Methods are considered very strong and reliable market patterns. 

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1. Rising Three Methods

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You can recognize this market pattern by noticing the following features/criteria:

• The first candlestick is bullish, and its opening is the lowest point of this pattern.
• The subsequent three candlesticks are bearish, and when added together, their size does not exceed the size of the first candlestick (this is not an exclusive rule, but if you do find this in the pattern, then the indication is even stronger). In some cases, however, there are not 3 candlesticks between the first and the last, but two. However, to stay certain, stay on the lookout for three. 
• There are some exceptions where the third candlestick is bullish. 
• The third and fourth candlesticks open higher than the previous candle closed (this is not an exclusive rule, however).
• The third and fourth candlesticks close lower than the spot where the previous candlestick closed. So, in tandem with the second candle, they’re falling. 
• The fifth candlestick is the same as the first one – long and bullish. With its length, it creates the highest achieved point in the pattern. Its opening point might also be higher than the closing of the fourth candle. 

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2. Falling Three Methods

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You can recognize this market pattern by noticing the following features/criteria:

• The first candlestick is long and bearish, and its opening is the highest point of this pattern.
• The subsequent three candlesticks are bullish, and when added together, their size does not exceed the size of the first candlestick (this is not an exclusive rule, but if you do find this in the pattern, then the indication is even stronger). In some cases, however, there are not 3 candlesticks between the first and the last, but two. However, to stay certain, stay on the lookout for three. 
• There are some exceptions where the third candlestick is bearish. 
• The third and fourth candlesticks open lower than the previous candle closed (this is not an exclusive rule, however).
• The third and fourth candlesticks close higher than the spot where the previous candlestick closed. So, in tandem with the second candle, they’re rising. 
• The fifth candlestick is the same as the first one – long and bearish. With its length, it creates the lowest achieved point in the pattern. Its opening point might also be lower than the closing of the fourth candle.

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An example of Rising & Falling Three Methods in realistic market scenarios: 

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We hope this Charting The Markets article has provided some insight into these common market patterns and will help you recognize, utilize, and capitalize on the rising and falling three methods when you see them out in the wild. Stay tuned for the next addition to Charting The Markets, where we’ll discuss the mat hold.