Japanese Candlestick Pattern Screen: Rising Three Methods

Japanese Candlestick Pattern Screen: Rising Three Methods

On February 22, 2010, In Japanese Candlestick Patterns, by Steve Warshaw

This is the 9th screen in the series: Japanese Candlestick Trading: Stock Screens for 15 Candlestick Patterns

Signal: Bullish Continuation

Inbound Trend: Bullish

Reliability: 7.1 / 10

Candlestick Pattern definition

The rising three methods pattern is a bullish continuation pattern that appears in bearish markets. The pattern consists of 5 candlesticks which must meet the following criteria:

The First Candlestick appears during an up trend
It must be a white (close above the open) candlestick, with a larger than average real body
The next three candles are typically black (bearish ), and retrace no higher than the open of the first day
It is ok if one of the middle three candles are white
The final candle is another large white candle
It must open within the first day’s candle, and close above the high of the first day’s candle

Trading the Rising Three Methods Pattern

The rising three methods pattern is rare enough, and reliable enough that it may be traded without other confirmation. Since the pattern occurs during an up-trending market, the orderly pullback after a large run up is a natural progression of profit taking. Obviously, the stronger the uptrend , the more reliable this pattern becomes.

I would look for higher volume on the days with large white candlesticks, and diminishing volume during the bearish 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 above open 4 days ago

and close 3 days ago is below close 4 days ago

and close 3 days ago is below open 3 days ago

and open 2 days ago is below open 4 days ago

and close 2 days ago is below open 2 days ago

and close 2 days ago is below close 3 days ago

and close 1 day ago is below close 4 days ago

and close 1 day ago is above open 1 days ago

and close 1 day ago is below open 1 day ago

and close 1 day ago is below close 2 days ago
and open is above close 1 day ago

and close is above close 4 days ago