Three Outside Up Candlestick Pattern

The Three Outside Up is a bullish reversal candlestick pattern that signals a potential trend change from bearish to bullish. It consists of three candles and typically appears at the bottom of a downtrend.

Structure of the Three Outside UpPattern:

1. First Candle (Bearish):

• A red (bearish) candle that continues the existing downtrend.

2. Second Candle (Bullish Engulfing)

• A green (bullish) candle that completely engulfs the first candle’s body.

• This is a Bullish Engulfing pattern, indicating a possible reversal.

3. Third Candle (Bullish Confirmation)

• Another green (bullish) candle that closes higher than the second candle.

• This confirms that buyers have gained control.

Key Characteristics:

✅ The second candle must engulf the first candle's body (not necessarily the wicks).

✅ The third candle must close above the second candle's close.

✅ Stronger when it appears at the bottom of a downtrend.

Psychology Behind the Pattern:

• The first bearish candle shows that sellers are still in control.

• The second bullish engulfing candle indicates that buyers are stepping in aggressively.

• The third bullish candle confirms that the uptrend has started, attracting more buyers.

Trading Strategy:

📌 Entry: After the third bullish candle closes above the second candle.

📌 Stop-loss: Below the low of the second candle.

📌 Target: Next resistance level or based on a risk-reward ratio (e.g., 1:2).