Three Outside Up Candlestick Pattern: Bullish Reversal
Sometimes, markets don’t just whisper a reversal—they show it loud and clear. The three outside up candlestick pattern is one of those loud signals. It starts with hesitation, followed by a strong bullish push that confirms a shift in momentum.
This pattern is known for turning a fading downtrend into a potential rally. It’s clear, easy to spot, and backed by strong price action.
What the Pattern Looks Like
Three candles, clear direction
The three outside up candlestick pattern appears after a downtrend and includes:
1. A small red candle that continues the current downtrend
2. A large green candle that completely engulfs the first red candle
3. Another green candle that closes above the second candle
It starts similarly to a bullish engulfing pattern, but the third candle adds an extra layer of confirmation, making the signal more convincing.
What It Suggests
Buyers are taking over
The first red candle shows sellers are still present, but they’re starting to lose steam. Then, a large green candle erases the red candle entirely—this shows strong buyer interest. The third green candle confirms the new direction, pushing above both previous candles.
This steady three-step move gives traders a reason to believe the trend may be shifting.
When It’s Most Effective
Look for real exhaustion first
The three outside up candlestick pattern becomes more meaningful when it forms after a sustained downtrend or near key support levels. Without that, it may just be a temporary bounce.
Here’s how traders typically read it:
Adding RSI, trendlines, or MACD can boost confidence in the pattern.
How Traders Use It
A reliable reversal with structure
Traders often use this pattern as a signal to enter long trades. But the third candle is key—it shows that buyers aren’t just reacting, they’re following through.
Here’s a simple strategy outline:
A common entry is above the high of the third candle, with a stop placed below the low of the first candle.
Real Chart Example
Let’s say AUD/USD has been trending lower. A small red candle appears, followed by a strong green candle that completely covers it. The next day, another green candle closes even higher.
That’s a valid three outside up candlestick pattern.
If this happens at a known support zone and volume picks up, traders often use it as a signal to enter a long trade.
Why It Works
Clear strength from the bulls
The three outside up candlestick pattern gives a straightforward picture of the market turning. It’s not vague or hard to interpret—buyers are clearly taking over, and sellers are stepping aside.
Next, we’ll move to the Three Outside Down pattern, which signals the exact opposite: a strong shift from bullish to bearish pressure.
