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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Three Outside Up

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Industrials (^DJI):
Transports (^DJT):
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Nasdaq (^IXIC):
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As of 07/20/2017
21,612 -28.97 -0.1%
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725 or 685 by 08/01/2017
6,450 or 6,175 by 08/01/2017
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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

Three Outside Up Candlestick: Summary

The three outside up candlestick acts as a bullish reversal both in theory and in reality. And it does so quite well. It has a high frequency number, so you should be able to find is as often as feathers on a duck. The overall performance is also quite good and that means the price trend, post breakout, is worthwhile if not downright tasty. However, you will want to avoid this candlestick pattern if you hold it for a short term (10 days). Upward breakouts under those conditions do particularly lousy. For longer term holds, avoid those in a bull market after a downward breakout.

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My book, Encyclopedia of Candlestick ChartsEncyclopedia of Candlestick Charts book., pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

 

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Three Outside Up Candlestick: Important Results

Theoretical performance: Bullish reversal
Tested performance: Bullish reversal 75% of the time
Frequency rank: 24
Overall performance rank: 34
Best percentage meeting price target: 47% (bull market, up breakout)
Best average move in 10 days: -7.14% (bear market, down breakout)
Best 10-day performance rank: 7 (bear 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.

The ideal three outside up candlestick
Three Outside Up
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Three Outside Up Candlestick: Discussion

Testing shows that the three outside up candlestick acts as a bullish reversal 75% of the time. That is a very good reversal rate. The overall performance ranks 34th, which is also high on the performance list, so the post breakout trend shows promise.

The best move 10 days after the breakout is a drop of 7.14% in a bear market. That ranks 7th, near the top of the list of 103 candle types. Looking at the measure rule, it says that the height of the candle added to the top of the candle pattern (an upward breakout) or subtracted from the bottom of the pattern (a downward breakout), gives a price target. Price only hits the target 47% of the time -- and that is the best showing. It warns not to expect a straight-line run before you encounter a minor high or low along the way.

Three Outside Up Candlestick: Identification Guidelines

CharacteristicDiscussion
Number of candle linesThree.
Price trend leading to the patternDownward.
ConfigurationLook for a black candle in a downward price trend. Following that, a white candle opens below the prior body and closes above it, too. The last day is a candle in which price closes higher, according to Morris who developed the candle.
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Three Outside Up Candlestick: Three Trading Tidbits

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. Three outside up candles that appear within a third of the yearly low perform best -- page 785.
  2. Select tall candles for the best performance -- page 785-786.
  3. For the best performance, look for the pattern in a downward retracement of the upward price trend -- page 786-787.

Three Outside Up Candlestick: Example

The three outside up candlestick on the daily scale

The chart shows a three outside up candlestick circled in red on the daily scale. In a downward price trend, a black candle appears followed by a white candle that opens below the prior body, but it may be difficult to see that from the chart. The white candle closes above the body, too. The last day of the three line candle is another white candle in this example. It shows a higher close.

Since price enters the three outside up from the top and exits out the top, it is a bullish reversal in this instance. However, the best trading setup is one in which price is trending upward over the longer term. Then price drops in a retrace of that up move followed by an appearance of the three outside up candlestick pattern. An upward breakout from this candle would rejoin the existing price trend, and off she goes.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. A mainframe: The biggest PC peripheral available.