Three Outside Up (and Down)
Also called: three outside down
A three-candle reversal: an engulfing pattern followed by a third candle that closes further in the new direction, confirming the engulf.
Three outside up starts as a bullish engulfing: a down candle, then a larger up candle whose body covers it. The third candle closes above the second, showing the buying carried into another session instead of fading the next day.
Three outside down is the mirror: a bearish engulfing followed by a third candle that closes below the second. The pattern trades a little of the move for confirmation, since the entry clue arrives one bar later than a bare engulfing.
How it has actually played out
- Three Outside Up: across 2,851 signals on US stocks in the last 150 days, price was higher a week later 45.1% of the time (+0.5 pts vs. an ordinary session) and higher a month later 40.3% (-2.1 pts).
- Three Outside Down: across 3,308 signals on US stocks in the last 150 days, price was lower a week later 51.7% of the time (-2.8 pts vs. an ordinary session) and lower a month later 54.8% (-2.4 pts).
Measured from the signal-day close, no stops or costs, versus every session of the same stocks over the same window. A base rate, not a prediction.
On StockSetups
StockSetups flags it when the last three daily bars form an engulf (second body opposite in color, larger, and covering the first) plus a close beyond the engulfing candle. Three outside up needs a prior downtrend, three outside down a prior uptrend. It shows on the Daily Candlesticks board or as a confirmation on a chart-pattern setup.
Scan for candlestick patterns nightly →Frequently asked
What is the difference between three outside up and three inside up?
Three outside up confirms an engulfing pattern, where the second candle is the larger one. Three inside up confirms a harami, where the second candle is the smaller one held inside the first.
Is three outside up bullish?
Yes. It's a bullish reversal clue after a decline. Its mirror, three outside down, is bearish after an advance.
Related terms
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