The rising three methods is an easy pattern to see during an uptrend. A long white (or green) candle forms and it is followed by a series of small candles. Each of the smaller candles is consecutively lower than the previous. The optimal number of pull-back days should be three however; two, four or even five pull-back days can be observed. The most important factor is that these candles do not close below the open of the big white (or green) candle. Also, the shadows on these candles should not go below the white (or green) candle. The candle of the final day of the formation should open up into the body of the last pull-back day and close higher than the first big white (or green) candle.
RISING THREE METHODS
Criteria for the Rising Three Methods
- An up-trend is in progress and a long white (or green) candle forms
- A group of small-bodied candles follow (preferably black or red bodies)
- The close of any of the pull-back days should not close lower than the open of the big white (or green) candle.
- The final day opens up into the body of the last pull-back day and proceeds to close above the close of the first big white (or green) candle day.
Pattern Psychology for Rising Three Methods
The rising three methods pattern suggests a rest in the trend or, in Japanese terms, a rest from battle. The concept is that the first black (or red) candle day brings some doubt into the bull camp. The following day does the same, and by the third day, the bulls are convinced that the bears do not have the strength to push prices down anymore. As a result, the bulls regain courage and start to step in. The rising three methods pattern resembles the western bull flag or pennant formation, however, the concept was originally developed in the 1700s. In modern terms, this pattern suggests that the market is just ‘taking a breather.”
Continue to learn about about the primary candlestick patterns and once you understand those then you can move onto the secondar, reversal and continuations patterns.