Bulkowski's Rising Three Methods

Written and copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved.

In my book, Encyclopedia of Candlestick Charts, pictured on the right, I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines in the tests.

The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines, performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators), and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy by clicking on the above link.

The rising three methods candlestick pattern reminds me of a measured move up chart pattern, only in miniature. The candlestick pattern begins with a tall white candle in a rising price trend, then three candle lines move against the trend followed by a resumption of the up move.

I do not find it a surprise that the rising three methods acts as a continuation pattern 74% of the time. I also do not find it surprising that the candlestick pattern is a rare. What disappoints me is the poor performance after price breaks out. It ranks 94 out of 103 candle types where 1 is best.

Rising Three Methods Important Results

Theoretical performance: Bullish continuation Tested performance: Bullish continuation 74% of the time Frequency rank: 88 Overall performance rank: 94 Best percentage meeting price target: 60% (bull market, up breakout) Best average move in 10 days: -5.10% (bull market, down breakout) Best 10-day performance rank: 7 (bull market, down breakout) All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts. The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Rising Three Methods

Rising Three Methods Discussion

The rising three methods is a complicated candlestick which results in few patterns found. I uncovered just 102 examples out of over 4.7 million candle lines. That means the statistics are likely to change, perhaps dramatically.

The rising three methods candle pattern acts in theory as it does in reality: bullish continuation 74% of the time. That is wonderful if you could find it in a historical price series but with a frequency rank of 88, the candle is quite rare. The best average move 10 days after the breakout is a respectable 5.10%, which ranks 7th for downward breakouts in a bull market.

Rising Three Methods Identification Guidelines

Three Trading Tidbits in Rising Three Methods

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

1. Trade this candle only when the primary trend is up -- page 638.
2. Rising three methods candles with tall shadows on the last candle tend to outperform -- page 637.
3. Volume gives performance clues -- page 637-638.

Rising Three Methods Example

The chart of Airgas on the daily scale shows a very good example of a rising three methods candlestick pattern in its native habitat. Price trends upward leading to a tall white candle. Then three small black candles trend downward -- opposite the prevailing price movement -- and then a tall white candle closes out the pattern.

This rising three methods candlestick acts as a continuation of the bullish move up.

-- Thomas Bulkowski

Copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved. There's no place like 127.0.0.1