Continuation Patterns pt.2

Forex Maniac > Japanese Candlestick Patterns > Continuation Patterns pt.2

RISING AND FALLING THREE METHODS

Three Methods is a trend continuation pattern. There are two kinds of this pattern: Rising Three Methods (Bullish pattern) and Falling Three Methods (Bearish pattern).

Rising Three Methods appear during the uptrend and include:

  1. Long White (Rising) candle
  2. A group of falling candles with small bodies follows the first extended Rising Candle. The ideal model has three falling candles, but that is not necessary. The important rule – this group of candles can’t go beyond the previous candle boundaries (High and Low of this candle). Also, the color of this candles does not play a great role; they can have both colors. Nevertheless, the ideal situation is three small black(falling) candles.
  3. Last trading bar appears to be the long, rising candle; it closes higher than the Close price of the first bar. Open price of the last candle also must be higher than the open price of the previous day.

Western Technical analyses have a similar pattern; it is called Bullish Flag.

Three Methods Model associates with the rest from the trading or with a break between the battles. In other words, with the appearance of the small candles market stops for a rest.

Three Methods

Falling Three Methods is formed on the downward trend. Firstly, large falling candle appear. A couple of small consistently rising candles follow the first long downtrend candle; This little candles must stay inside the first candle. Open price of the last candle must be lower than the Close price of the previous candle. The last candle closes lower than the first one of the formation and represents the continuation of the downtrend.

This model, also, resembles figure Bearish Flag, from Western Technical Analysis.

THREE ADVANCING WHITE SOLDIERS

The name of this model, as well as many models from Japanese Candlestick Analysis, has resemblance with warfare. This pattern has a name – Three Advancing White Soldiers. The model consists of three white candles with sequentially rising Close levels. If such formation appears in the stagnation period – this mean that market is gaining momentum again.

Three Soldiers

This model reflects gradually, and steady price grows. Open price of each candle ranges within the body of the previous candle. Close prices are equal or close to the High prices of each candle.

If third candle, or two last candles, show signs of weakening – Three Advancing White Soldiers become Advanced Block Pattern. Especially after a prolonged upward trend, such model heralds the imminent price reversal.

Another one type of unfinished of Three Advancing White Soldiers is Deliberation pattern. The structure of the Deliberation:  the second candle has long body and tops with a new maximum; afterward goes third, small-bodied candle. Such formation shows, that Bulls either losing power either taking a break. If this model appears during uptrend – we recommend closing long positions.

SEPARATING LINES

Separating Lines pattern often identified as a mirror reflection of the Reverse Pattern Counterattack Lines. Both of these models consist of two candles, in Counterattack Pattern both candles have the same Close price; In Separating Lines, in its turn, candles has the same Open prices.

Separating Lines model indicates about trend continuation. The first candle of the formation has anti-trend direction (falling candle for the uptrend, rising candle for the downtrend). The second candle has trend direction. The longer second candle – the strongest the pattern.

The first candle of the formation shows doubts among traders; Long second candle brings back confidence to players.

Separating Lines

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