Three Outside Up Pattern – Bearish

Bearish Three Outside Up is a three-candle bearish trend reversal pattern.

A bullish candlestick is followed by a bearish candlestick that opens above the closing price and closes below the opening price of its previous candlestick. In other words, the body of the second bearish candlestick engulfs the body of its previous bearish candlestick. It is a Bearish Engulfing pattern that we discussed earlier.

Above pattern is followed by a bearish candlestick which closes lower than the body of the previous bearish candlestick pattern. It is a bearish breakout pattern and known as a Bearish Three Outside Up pattern. It is a bearish trend reversal formation.

The pattern remains bearish as long as price is trading below the low price of the third candle of the pattern. More volume in the third bearish candle in the pattern indicates that the breakout is strong. Three Outside Up pattern is basically a Bearish Engulfing pattern breakout in the next candle itself. This pattern is stronger than the Bearish Engulfing pattern.

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This pattern can be plotted on the chart by adding it from the Add study menu in TradePoint & Patterns in RZone. The pattern is also available in the System Builder section. By combining this pattern with other patterns and indicators, you can create your own trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.