As of 12/27/2024   Indus: 42,992 -333.59 -0.8%     Trans: 16,031 -73.46 -0.5%     Utils: 987 -4.51 -0.5%     Nasdaq: 19,722 -298.33 -1.5%     S&P 500: 5,971 -66.75 -1.1%	YTD  +14.1%    +0.8%    +12.0%    +31.4%    +25.2%	Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,700 or 15,500 by 01/15/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/27/24

As of 12/27/2024   Indus: 42,992 -333.59 -0.8%     Trans: 16,031 -73.46 -0.5%     Utils: 987 -4.51 -0.5%     Nasdaq: 19,722 -298.33 -1.5%     S&P 500: 5,971 -66.75 -1.1%	YTD  +14.1%    +0.8%    +12.0%    +31.4%    +25.2%
Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,700 or 15,500 by 01/15/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/27/24

Bulkowski on the Falling Three Methods Candle Pattern

My book, Encyclopedia of Candlestick Charts, pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

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The falling three methods candles pattern is one of my favorite candlesticks. Why? Because it reminds me of a miniature measured move down chart pattern. That chart pattern sees price drop, recover during the corrective phase, and then the drop resumes. The falling three methods candle pattern accomplishes all of that in just five candles.

The falling three methods candlestick behaves in theory as it does in real life. It is a bearish continuation 71% of the time and a reversal the remainder of the time. Unfortunately, with just 64 samples appearing out of 4.7 million candle lines studied, solid performance statistics are as rare as the candle itself.

Falling Three Methods: Important Results

Theoretical performance: Bearish continuation Tested performance: Bearish continuation 71% of the time Frequency rank: 91 Overall performance rank: 89 Best percentage meeting price target: 40% (bull market, down breakout) Best average move in 10 days: 4.58% (bull market, up breakout) Best 10-day performance rank: 20 (bull market, up breakout) All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts. The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Falling Three Methods

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Falling Three Methods: Discussion

The falling three methods candlestick pattern is so rare that I do not show in my Encyclopedia of Candlestick Charts book the statistics from the 64 falling three methods that I uncovered. Most of the entries would have been blank. The above important results show more information than the book.

The falling three methods pattern acts as a bearish continuation 71% of the time, giving it a rank of 7 which is very high (1 is best). As I mentioned, it is a rare bird, having a frequency rank of 91 out of 103 candles where 1 means it occurs most often. The overall performance ranks 89th probably due to the few samples available for testing. Just 40% of the candles meet the measure rule price target, which is the height of the candlestick pattern added to (upward breakouts) or subtracted from (downward breakouts) the top or bottom of the candle pattern, respectively. The average move is a rather robust 4.58% in 10 days, where a good move would be 6% or more. The 4.58% move also gives it the 20th best performance rank against the other 103 candle patterns.

Falling Three Methods: Identification Guidelines

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Falling Three Methods: Example

Shown on the daily chart, circled in red, is one of the few examples of a falling three methods candlestick. The first and last days are tall black candlesticks. Between them are three smaller candle lines that trend upward and remain within the high-low range of the first candle, well, sort of. The shadows of the middle three candles poke outside the range. The last candle closes below the low of the first candle.

This falling three methods pattern acts as a reversal of the brief downtrend. Price closes above the top of the five candlesticks, scoring an upward breakout.

-- Thomas Bulkowski

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See Also

• The mat hold candle pattern is similar to the falling 3 methods. Find out why.
• If you liked the mat hold, you will love the rising three methods.
• Tall candles show support and resistance.
• Two candlestick tips could improve profitability.
• Candles near the yearly low perform best.
• Chart pattern breakouts: Which candlesticks appear most often the day before breakouts?
• Shadows. Do tall candle shadows predict price turns? Yes and no.
• Tall candles at peaks and valleys. Tall candles appear at turning points.

I doubt, therefore I might be.