Continuation Candlestick Patterns

Falling Three Methods

• In a downtrend, a long red day occurs

• The second, third and fourth days are short blue days that fall within the range of the first day

• The fifth day continues the downtrend with a long red candle that creates new lows

The Falling Three Methods pattern occurs in a bear market, where during a downtrend the market rests before resuming the trend. The bearish trends break is reflected by small candles that all stick to a strict market range formed by the aggressive move on day one. A typical explanation for this type of formation might that the market is slowly digesting the relatively larger move in day-one. These small daily ranges often precede significant economic reports. Such periods of relative inactivity and tight trading are common in markets.

Bearish In-Neck , On-Neck & Thrusting Continuation Patterns
• First day we'd see a long red candle

• The second day is blue day, opening below the low of the first day and closing barely into the body of the first day

In non-FX markets the In Neck starts with the red continuation candle, day two gaps down to open well below the close of day one - then rallies back up to day-one's close. In Neck suggests that the despite the large bullish move by the blue star on day-two - when the market moves deeply down, only to rally back it, the market is still continuing the downtrend and capable of additional bear moves in days to come.
The On Neck suggests very similar analysis of market sentiment. But because the On Neck does not trade up to the previous day's close or into day-one's candle, it serves as a strong bearish continuation signal.
Thrusting Patterns (which look similar to Bearish Piercing Lines) again offers similar analysis. But because the Trusting pattern trade well into day-one's candle, it is the weakest bearish continuation signal.

Three Line Strike
• After an established downtrend three long red days in a row continue this move, each closing lower than the previous day

• Day-four is blue candle that closes near the open of the first day

So long as the previous downtrend is an established one, candlestick analysts view this formation as a sign that the downtrend may still continue.

Three Line Strike
• Three blue days occur in a row continuing an established bull trend.

• Each day should close higher than the previous day.

• Day-four is red candle that closes near the open of the first day

So long as the previous uptrend is an established one, candlestick analysts view the Three Line Strike formation as a sign that the downtrend may still continue. The first three days serve as a fairly clear bullish move. Up to day-three in fact we have a Three White Shoulders formation and a strong bullish signal. One day of sell-offs that only goes down to the open price of the patterns start is considered to be more a sign that longs are covering their positions than any true sign of a reversal. Thus traders will watch for long entry opportunities to come. Since the overall signal is fairly weak, most will want confirmation in the form of bullish price action the next day.

Rising Three Methods

• In an uptrend, the first day is long blue candle

• The next three days are short red candles, ideally not exceeding the range of day-one

• The fifth day resumes the trend with a long blue candle

The Rising Three Methods bullish continuation pattern occurs in a bull market, where during an uptrend the market rests before resuming the trend. The bullish trends break is reflected by small candles that all stick to a strict market range formed by the aggressive move on day one. A typical explanation for this type of formation might that the market is slowly digesting the relatively large moved reflected by day one. The small daily ranges in the middle candles often precede significant economic reports and FX moves. Such periods of relative inactivity and tight trading are common. Rising Three Methods is confirmed where a blue candle dives up to new highs reinstituting the bullish trend.

• Number of Middle CandlesIn a picture perfect formation the middle candles number three. But realistically the pattern may have two, four or even five candles. Individually each middle candle may be a star or Doji, red or blue.

• Middle Candle WicksImportant to note is that each middle candle wick needs to stay within the first candles high/low range to signal a strong continuation signal. With the bullish Rising Three Methods this is especially important for the lows. Should if a wick trades to a low below the first large blue candles low, it casts doubt over the strength of the continued uptrend.