As of 02/21/2025   Indus: 43,428 -748.63 -1.7%     Trans: 16,034 -430.64 -2.6%     Utils: 1,023 +3.75 +0.4%     Nasdaq: 19,524 -438.35 -2.2%     S&P 500: 6,013 -104.39 -1.7%	YTD  +2.1%    +0.9%    +4.1%    +1.1%    +2.2%	Targets    Overview: 02/13/2025     42,500 or 45,000 by 03/01/2025   16,900 or 15,800 by 03/01/2025   1,050 or 970 by 03/01/2025   19,200 or 20,500 by 03/01/2025   5,875 or 6,200 by 03/01/2025
Chart Pattern Indicator: on 2/19/25

As of 02/21/2025   Indus: 43,428 -748.63 -1.7%     Trans: 16,034 -430.64 -2.6%     Utils: 1,023 +3.75 +0.4%     Nasdaq: 19,524 -438.35 -2.2%     S&P 500: 6,013 -104.39 -1.7%	YTD  +2.1%    +0.9%    +4.1%    +1.1%    +2.2%
Targets    Overview: 02/13/2025     42,500 or 45,000 by 03/01/2025   16,900 or 15,800 by 03/01/2025   1,050 or 970 by 03/01/2025   19,200 or 20,500 by 03/01/2025   5,875 or 6,200 by 03/01/2025
Chart Pattern Indicator: on 2/19/25

Bulkowski on 3-Bar

Initial release on 1/29/2025.

This article discusses the 3-bar chart pattern, including what to look for and how it behaves in stocks, exchange traded funds, and cryptocurrency.

3-Bar: Overview

If you use this pattern for only one thing, use it to predict an upward breakout. That can be valuable in trading. It's correct 85% of the time. By that, I mean price moves above the top of the highest bar in the pattern 85% of the time (versus moving below the bottom of the lowest bar of the three). Not included in the count was the price doing both, on the same price bar (and upward and downward breakout in one day).

I've more small patterns to test, but this one ranks 22 where 1 is best, out of 34 patterns.

3-Bar: Identification Guidelines

The following table shows the identification rules.

Look at the figure. The first bar in this example is a black candle but it need not be. However, price closes lower than the prior day's close. Don't confuse this with a close below the same day's open.

The middle price bar has a low below the two adjacent price bars.

The last bar in the pattern closes above the highs of the other price bars. A less-stringent variation has the last bar closing above the high of the middle bar only. In testing, because this is such a prolific pattern, I used the harder test, meaning the last price bar in the pattern has to close above the highs of the other two bars.

3-Bar: Target Exit, Stock Performance

Trading using a target exit is simple to explain. Look at the adjacent stock chart.

I highlighted the 3-bar pattern in the box. The first bar shows a lower close. The middle bar is below the other two (low price), and the last bar (high price) is above the other two.

I placed a buy stop a penny above the top of the pattern. An upward breakout happens four days after the pattern ends, as shown. However, the stock drops, slowly, eventually trigging a stop placed a penny below the middle price bar.

If the trade had worked as expected, I had a sell order ready at a price that was twice the height of the pattern added to the top of it.

Testing

As explained in the example above, a buy signal happened when the stock climbed a penny of more above the top of the pattern (that is, I placed a buy stop a penny above the highest price bar in the pattern). I set an order to sell at a price twice as high as the height of the 3-Bar pattern added to the highest bar in the pattern. I placed a stop loss a penny below the bottom of the pattern to help limit losses (by catching a dropping stock automatically).

The tables shows results for bull markets with upward breakouts (only) and an inbound price trend either up or down. I used 489 stocks in the test. For additional testing methodology details, click the link.

Both up and down trends produced results that beat the benchmark except those 3-bars in an uptrend gave better results than did those in a downtrend.

3-Bar: Target Exit, ETF Performance

I used the same method to test the 3-bar in exchange traded funds (ETFs) as I did in stocks. The chart shows an example trade that worked.

A buy stop triggered not a penny above the top of the 3-bar, but at the opening price after the ETF gapped open higher. A stop loss order lay ready to exit on an adverse move (placed a penny below the middle price bar).

The ETF reached the target exit near the peak, just a day before, sealing the trade for a profit.

Testing

This is the same test as the prior one except I used 94 exchange traded funds (ETFs) instead of common stocks.

In both trend directions, the 3-Bar flops as a trading setup. Don't use this pattern in ETFs, at least, now how I tested it. However, the pattern in uptrends works better than in downtrends, which is the same finding as we saw in stocks.

3-Bar: Target Exit, Crypto Performance

I show an example of a 3-bar in a cryptocurrency, AAVE versus USD. The 3-bar is in the red square.

I used the same setup in crypto as I did in stocks and ETFs, that is, a buy stop placed a penny above the top of the pattern gets us into the trade on an upward breakout. A stop loss placed a penny below the bottom of the pattern helps limit losses, and a target exit appears at twice the height of the 3-bar pattern added to the top of it.

Entry happened a day after the pattern ended (upward breakout) and the ETF continued upward until reaching the target, where the position sold.

Testing

The 3-bar pattern in the cryptocurrency world, at least for the securities I tested, works well in uptrends with the average profit per trade of $256.66 versus the benchmark $224.62. Downtrends were a disaster. Having written that, the example trade (chart above) shows the pattern in a downtrend...go figure.

-- Thomas Bulkowski

See Also

• How did I test small patterns in stocks, ETFs, and crypto currency?
• Small pattern performance.
• Updated daily list of short patterns.

Other 3-bar patterns

• 3DC
• 2-Close bullish reversal
• 2-Close bearish reversal
• 3-bar candlesticks
• Bearish double-key reversal
• Bullish double-key reversal
• Gap 2H
• Inverted gap 2H
• Horn top
• Horn bottom
• Shark-32