3 external up candlestick patterns

Three Outer Up Candlestick Patterns – Psychology

The formation of the Three Outside Up candlestick pattern usually indicates a change in market sentiment, and its appearance during a downtrend signals a potential reversal in the stock.

During a downtrend, the first red candle shows that there was more selling pressure on the stock. However, the next candle to form is a green candle that completely engulfs the previous red candle, suggesting that buyers have overwhelmed sellers in the stock.

The formation of a third green candle with a closing price higher than the closing price of the second candle serves to confirm changes in market sentiment. This change in market sentiment can potentially lead to more buying pressure, so the formation of this pattern typically signals bullish momentum.

Three Outer Up Candlestick Patterns – Trading Ideas

Traders must ensure that the previous trend before this pattern was formed was a downtrend. When this pattern is formed in a downtrend, here are some guidelines for trading:

• entry: If the price of the security begins to trade above the closing price of the third candle of the Three Outside Up Candlestick pattern, a trader can take a long position.
• Target: Traders can exit a trade when the price of a security reaches an immediate resistance zone. Once this level is reached, you can also take a partial profit on the trade and hold the remaining position until the next resistance level.
• Stop Loss: merchant You can place a stop loss near the low price of this pattern.

Three Outside Up Candlestick Patterns – Example

In the AXIS BANK 1-day chart above, you can see three external rising candlestick patterns forming after a brief downtrend. As discussed above, the price of this stock saw a bullish reversal after this pattern was formed.

When this pattern was formed, traders could have taken long positions of more than Rs. 620.25 and the stop loss was Rs. 580.55

Three Outer Up Candlestick Patterns – Strengths

In certain scenarios, the Three Outside Up pattern takes on greater significance in signaling a bullish reversal, especially when it forms within a strong support area. This zone, which has rejected price action several times in the past, adds weight to the meaning of the pattern. Occurring within this zone indicates there is demand for the stock near that price.

Furthermore, if you combine this pattern with relative strength index(RSI) can amplify bullish reversal signals. If the RSI indicates oversold conditions when the pattern is formed, the bullish momentum is strengthened. An oversold RSI indicates prolonged selling pressure and presents a golden moment for buyers.

By combining these indicators, traders can leverage pattern formations and oversold signals in RSI to gain a more robust assessment of potential success.

Read More: Stocks with High Promoter Commitment in India

conclusion

A powerful tool in a trader’s toolbox, the Three Outside Up candlestick pattern clearly indicates a bullish reversal following a downtrend. By understanding the creation, psychology, and trading tactics of patterns, traders can successfully use these patterns in their trading methods.

However, as with technical indicators, it is important to consider other factors such as market conditions, trend strength, and risk management before making trading decisions.

Written by Praneeth Kadagi

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