Three Outside Down

The Bearish Three Outside Down pattern is a three-candlestick bearish trend reversal pattern.

The Three Outside Down pattern was proposed as an extension of the two-line Bearish Engulfing.

The first and second lines form the Bearish Engulfing pattern.

The first line can appear as a short or long line. It can be any basic candlestick with a white body. Doji candles are allowed.

The second line must appear as a long line and the candlestick must be black in color. Spinning Tops and Doji candles are not allowed.

The last line can be any basic candlestick, which has a black body and closes below the closing price of the second candlestick.

The length of the shadows does not matter for any line.

The Three Outside Down pattern appears in a downtrend that predicts its reversal. Although the third line is a kind of confirmation of the Bearish Engulfing, it is worth waiting for confirmation on subsequent candles. In other words, it is recommended to see if the price breaks out of the nearest resistance zone or a trend line. Depending on the market, if there is information about trading volume, it should usually be significantly higher on the third line of the pattern.