This is the 7th screen in the series: Japanese Candlestick Trading: Stock Screens for 15 Candlestick Patterns
Signal: Bearish Continuation
Inbound Trend: Bearish
Reliability: 7.1 / 10
Candlestick Pattern definition
The falling three methods pattern is a bearish continuation pattern that appears in bullish markets. The pattern consists of 5 candlesticks which must meet the following criteria:
- The First Candlestick appears during a down trend
- It must be a black (close below the open) candlestick, with a larger than average real body
- The next three candles are typically white (bullish), and retrace no higher than the open of the first day
- It is ok if one of the middle three candles are black
- The final candle is another large black candle
- It must open within the first day’s candle, and close below the low of the first day’s candle
Trading the Falling The Methods Pattern
The falling three methods pattern is rare enough, and reliable enough that it may be traded without other confirmation. Since the pattern occurs during a down trending market, the orderly pullback after a large sell off is a natural progression of profit taking. Obviously, the stronger the downtrend, the more reliable this pattern becomes.
I would look for higher volume on the days with large black candlesticks, and diminishing volume during the bullish pullback. A trend strength indicator such as the ADX or AROON can be used in conjunction with a momentum indicator (I prefer on balance true range) to help verify trend continuation.
The Stock Fetcher 2.0 Stock Screen Code
set{body_bottom,min(open,close)}
set{body_top,max(open,close)}
set{body_size, abs(body_top minus body_bottom)}
set{large_body, 1.5 * body_size}
set{small_body, .75 * body_size}
Show stocks where close is above 5
and average volume(30) is above 250000 do not draw average volume(30)
and MA(21) is below MA(55)
and body_size 4 days ago is greater than CMA(large_body,30)
and close 4 days ago is below open 4 days ago
and close 3 days ago is below open 4 days ago
and close 3 days ago is above open 3 days ago
and close 2 days ago is below open 4 days ago
and close 2 days ago is above open 2 days ago
and close 1 day ago is below open 4 days ago
and close 1 day ago is above open 1 days ago
and open is below close 1 day ago
and close is below close 4 days ago
Popularity: 3% [?]
