Three Outside Up

The Three Outside Up pattern is a three-line pattern that is an extension of the two-line Bullish Engulfing. The pattern was introduced with the intent of improving the performance of the two-line pattern. The third candlestick is intended to act as a confirmation of the Bullish Engulfing. As with the Bullish Engulfing, the first black candlestick is engulfed by the second one with a white body.

The first line can appear as a short or long line. It can be any basic candlestick with a black body, including Doji candles.

The second line must appear as a long line and the candlestick must be white in color, but it cannot be a Doji candlestick.

The last line of candles can be any basic candle, which has a white body and closes above the closing price of the second candle.

In the case of this pattern, the length of the shadows does not matter.

Although the idea behind the Three Outside Up is to confirm the Bullish Engulfing, the extended pattern should still be confirmed. The confirmation can be in the form of a breakout of the nearest resistance zone or a trendline.