Falling three Method

Swing Trading . Stock market picks


The falling three methods is a bearish candlestick pattern that can be used to confirm continued downward pressure of a given security.

The pattern consists of five different candlesticks. The first candlestick is a big day. The second, third and fourth candles are all smaller days. While it does not matter if these days are up or down days they only need to stay below the open and above the close of the first candlestick.

The last day of the pattern is another large dawn day. This day must break below the close of the first day. After it does this pattern gives us a sell signal.

Why does this work? The first candlestick sets a defined support and resistance levels determined by it open and close. When the last candle makes it to a new low it is as if the stock has just broken support.

Below is an example of how a falling three method pattern will appear on a chart.