Three Outside Up / Three Outside Down
A three-candle reversal that adds a confirmation candle to an Engulfing pattern — the engulf flips control, the third candle proves it sticks.
Three Outside Up and Three Outside Down are three-candle reversal patterns built on top of an Engulfing pattern. They take the two-candle Engulfing — where the second candle's body completely wraps the first — and add a third candle that extends the move in the new direction.
- Three Outside Up (bullish, at a downtrend bottom): a bearish candle, then a larger bullish candle that engulfs it (a Bullish Engulfing), then a third bullish candle closing higher still.
- Three Outside Down (bearish, at an uptrend top): a bullish candle, then a larger bearish candle that engulfs it (a Bearish Engulfing), then a third bearish candle closing lower still.
The name's logic mirrors Three Inside: "outside" because the second candle's range opens outside the first (an engulf), versus the Harami's body sitting inside. The engulfing candle already signals a control shift; the third candle's continued close in the same direction filters out engulfings that immediately fail. Because the engulf itself is a strong signal, Three Outside patterns are generally considered more potent than their Three Inside counterparts. Strongest after a prolonged trend, at a key level, with volume expanding through the sequence.
Example
At resistance after a long rally, a green candle is followed by a larger red candle that opens above the prior close and closes below the prior open, swallowing it whole (a Bearish Engulfing). The next day closes lower again, beneath the engulfing candle. That third close confirms Three Outside Down — sellers are in control, and traders short with a stop above the pattern's high.
Related Terms
Bearish Engulfing
A large bearish candle that completely wraps the prior bullish candle's body — supply takes control — a reversal warning at the top of an uptrend.
BeginnerBullish Engulfing
A large bullish candle that completely wraps the prior bearish candle's body — a strong demand-takes-control reversal signal at the bottom of a downtrend.
BeginnerEvening Star
A three-candle bearish reversal: a long bullish candle, a small indecision candle gapping higher, then a large bearish candle reclaiming the midpoint.
BeginnerOutside Bar
A candle that engulfs the prior candle's entire range — high-to-low — showing a sudden expansion of volatility and a potential directional shift.
BeginnerThree Inside Up / Three Inside Down
A three-candle reversal that adds a confirmation candle to a Harami — a stalling move inside the prior body, then follow-through that seals the turn.
Intermediate