The Rising and Falling Three Methods Patterns
The Rising and Falling Three Methods Patterns
The Three Methods pattern is a trend continuation pattern that can appear in an uptrend or a down trend. In an uptrend it is called the rising three methods pattern and in a downtrend it is called the falling three methods pattern. The three methods pattern consists of at least five candlesticks but may include more. It is similar to the flag or pennant formations and also represent a period of congestion or consolidation.
The Rising Three Methods
The Rising Three Methods pattern is a continuation pattern that appears in an uptrend. The first candlestick in this pattern is a light bullish candlestick with a large real body. The following few candlesticks should be smaller bearish candlesticks that are dark in color. These candlesticks should not exceed the range of the first candlestick. In other words it should be within the high and low of the first candlestick. The last candlestick that completes the pattern should open higher than the close of its preceding candlestick and should close above the close of the first candlestick. This pattern is more reliable if the first candlestick does not have much upper and lower shadows.
The Falling Three Methods
The Falling Three Methods is the opposite of the rising three methods and appears in a downtrend. The first candlestick in this pattern is a dark bearish candlestick with a large real body. The following few candlesticks should be smaller rising candlesticks that are bullish and light in color. These candlesticks should not exceed the high or the low of the first candlestick. The last candlestick that completes the pattern should below the close of its preceding candlestick and should close lower that the close of the first candlestick.
The Hanging Man and Hammer candlestick patterns are related trend reversal patterns that may appear at the end of an uptend or downtrend respectively. This is a single candlestick pattern that with a short real body, little or no upper shadow and a long lower shadow that must be at least twice as long as length of the real body. The color of the candle is not import, only its location in the current trend.
The Hammer pattern is called a takuri in Japanese, which means testing the water for its depth. This is the bullish version of the pattern. A bearish ...
The Tweezers Top and Tweezers Bottom patterns are minor trend reversal patterns that consist of two candlesticks with the same approximate high or the same approximate low respectively. The two candlesticks should have alternating colors with the first confirming the current trend and the second indicating a weakness in the trend. The reliability of these patterns increase when the first candlestick is has a large real body while the second candlestick has a short real body.
In the Tweezers Top pattern, the first candlestick should be a bullish candlestick with a ...
The Evening Doji Star
Star patterns are trend reversal patterns that consist of three candlesticks, with the middle candles stick forming the star. A star is a candlestick with a short real body, like a doji or a spinning top, that gaps away from the real body of the preceding candlestick. There are three basic star patterns: the morning star, which appears in a downtrend; and the evening star and the shooting star, which appear in an uptrend.
The morning star and the evening star have a doji or a spinning top as the second candle...
Bullish Harami Pattern
'Harami' is an old Japanese word that means pregnant and describes this pattern quite well. The harami pattern consists of two candlesticks with the first candlestick being the mother that completely encloses the second, smaller candlestick. It is a reversal candlestick pattern that can appear in either an uptrend or a downtrend. When the second candlestick is a doji, the pattern is called a harami cross and is more significant than the normal harami pattern as the doji's lack of a real body indicates great indecision and uncertainty.
When the harami pattern is ...
Continuation patterns indicate that there is a greater probability of the continuation of a trend than a trend reversal.. These patterns are generally formed when the price action enters a consolidation phase during a pre-existing trend. During the consolidation phase, the trend appears to change; however, the continuation of the preceding trend is more probable.
Some of the common continuation patterns include the cup and handle pattern, flags and pennants, symmetrical triangles, ascending triangle and desc...
Reversal patterns mark the turning point of an existing trend and are good indicators for taking profit or reversing your position. Generally, trend reversal patterns indicate that a support level in a downtrend or a resistance level in an uptrend will hold and that the pre-existing trend will start to reverse. These patterns allow you to enter early in the establishment of the new trend and are usually result in very profitable trades.
The common reversal patterns include the double tops and double bottoms, triple tops and triple bottoms, broadening tops and broadening bottoms, ...