Falling Three Methods
Candlestick PatternsA five-candle bearish continuation pattern: a long red candle, three small rising candles contained within it, and a final long red candle closing at a new low.
What Are Falling Three Methods?
Falling three methods is a bearish continuation pattern made of five candles. It starts with a long red (bearish) candle in line with the Downtrend. The next three candles are small-bodied and move upward, but remain within the range of the first candle. The fifth candle is another long red candle that closes at or below the first candle's close, resuming the downtrend.
What It Means
The three small candles represent a brief pause or pullback within the downtrend. They show that buyers attempted a rally but could not push price above the first candle's high. The final red candle confirms that sellers still control the market and the downtrend continues.
On USD/JPY, falling three methods during a daily downtrend tells you that the brief bounce was just a rest stop, not a reversal. Sellers used the pullback to add to short positions.
Trading Rules
Enter short when the fifth candle closes below the first candle's low. The stop goes above the highest point of the three middle candles. Target the next Support level or project the range of the pattern downward.
The bullish counterpart is called "rising three methods," where three small bearish candles are contained within a bullish trend. Both patterns confirm that a brief counter-trend move is just a pause, not a reversal, reinforcing the dominant Trend direction.
Related Terms
Three Black Crows
Three consecutive long red candles with progressively lower closes, each opening within the prior candle's body. It signals a strong bearish reversal or continuation.
Bearish Engulfing
A two-candle bearish reversal pattern where a large red candle completely engulfs the body of the preceding green candle. It signals strong selling pressure after a rally.