Falling Three Method – Continuation Pattern

A major candlestick continuation pattern is called the three methods signal and be classified as a rising three, which is bullish, or a falling three, which is bearish. Both signal small interruptions but do not signal a reversal. Taking the concepts of supply and demand into consideration, the three methods are predicated by uncertainty in the market. However, the market corrects itself when the bulls see can’t be made or when the bears see that a new high cannot be made. In either situation, the original trend continues. The bulls become bullish again and the bears become bearish again. The three methods are related to support and resistance lines, which can be penetrated, and the Rising Three Methods signal and the Falling Three Method signals are ways of confirming that the attempted penetration will fail, and that the trend will continue.

The Falling Three Method begins with a long black candle followed by a series of upward reaction candles. These candles all form within the range of the original candle, but have smaller bodies. Normally, the smaller candles would be white, since the large trend candle is black. The fifth and final candle is the same as the original trend candle but it closes at a new low and opens lower than the close of the previous day. The only difference is that the candle will be higher or lower, depending on the trend of the original candle.

Recognizing continuation patterns is important, whether you are in a long position or a short one. Besides adding to positions, it also confirms your other indicators. Even if you are trading on the short side, the three methods can help you use the continuation pattern to do much more.

FALLING THREE METHOD

Description

The Falling Three Method is basically the opposite of the Rising Three Method, The market has been in a downtrend. A long black candle forums. It is then followed by a series of small candles, each consecutively getting higher. the optimal number of uptrending days should be three. Again, two or four or five counter trend days can be observed. The important factors are that they do not close above the open of the big black candles and that the shadows do not go above the black candle’s open. The final day of the formation should open down in the body of the last uptrend day and close lower than the first big black candle’s close.
Criteria

1. 1. A Downtrend is in progress. A long black candle forms.
   2. A group of small bodied candles follow, preferably white bodied.
   3. The close of any of the uptrend days not does close higher than the open of the big white candle.
   4. The final day opens up into the body of the last uptrend day and proceeds to close below the close of the first big black candle day.

Pattern Psychology

The Falling Three Method is considered a rest in the downtrend. Just lie the Rising Three Method, the appearance of the white candle unnerves the bears. But any they see the bulls unable to take the prices higher, the bears gain their confidence back and resume their selling. The concept is that the first black candle day brings some doubt ino the bull camp. The next day does the same. By the third day, the bears are now convinced that the bulls do not have the strength to push prices up anymore. The bulls get their courage back and start stepping in.

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