What Is the Falling Three Methods Pattern?

The "falling three methods" is a bearish, five-candle continuation pattern that signals an interruption of a cur꧃rent downtrend but not a reversal. The pattern is characterized by two long candlesticks in the direction of the trend—in this case, down—at the beginning and end. Three shorter counter-trend candlesticks appear i♉n the middle.

This can be contrasted with the 澳洲幸运5官方开奖结果体彩网:rising three methods.

Understanding the Falling Three Methods Pattern

The falling three methods pattern occurs when a 澳洲幸运5官方开奖结果体彩网:downtrend stalls as bears lack the impetus or conviction to keep pushing a security's price lower. This leads to a counter-move that is often the result of 澳洲幸运5官方开奖结果体彩网:profit-taking and is possibly an attempt by eager bulls anticipating a reversal. The subsequent failure to make new highs or close꧅ above the opening price of the long-down candle emboldens bears to re-engage. This leads to a resumption of the downtrend.

• The falling three methods pattern forms when the five candlesticks meet the following criteria that are depicted in this image:

• The long bearish candlestick within the defined downtrend is the first in the pattern.
• It's followed by the three ascending small-bodied candlesticks that trade below the open or high price and above the close or low price of the first candlestick.
• The fifth and final candlestick should be a long bearish one that pierces the lows established since the first candlestick. This indicates that the bears are back.
  

The series of small-bodied candlesticks at the left in the falling three methods pattern is regarded as a period of consolidation before the downtrend resumes. These candlesticks are ideally bullish, especially the second one, although this isn't a strict requirement.

The pattern’s bullish equivalent is the "rising three methods."

Trading the Falling Three Methods

The falling three methods pattern provides traders with a pause in the downtrend to initiate a new short position or add to an existing one.

A trade can be taken on the close of the final candlestick in the pattern. Conservative traders may want to wait for other indicators to confirm the pattern and enter on a close below the final candle. A trader might wait for the 10-period 澳洲幸运5官方开奖结果体彩网:moving average to be sloped downward and near the high of the fifth bar in the🐽 pattern to confirm that the market is in a downtrend.

Traders should make sure that the pattern isn't sitting above a key support level, such as being located just above a major trend line, a round number, or 澳洲幸运5官方开奖结果体彩网:horizontal price support. There may not be support but it's prudent for trader𝔉s to check other time frames to confirm that the downtrend has ample room ﷺto continue.

The Bottom Line

The falling three methods pattern offers traders several options for placing suitable 澳洲幸运5官方开奖结果体彩网:stop-loss orders. Aggres♕sive traders may want to set a stop above the fifth candle in the pattern. Traders who want to give their position more wiggle room can either place a stop above the third small countertrend candle or the high of the first long black bearish candle in the pattern.

Traders should check that there are no major support levels on the daily and weekly charts before taking a trade if the ౠpattern forms on the 60-minute chart☂.