Leavitt Brothers: Education - CandleStick Patterns

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	Abandoned Baby
	Belt Hold
	Breakaway
	Concealing Baby Swallow
	Doji Star
	Dragonfly Doji
	Engulfing
	Gravestone Doji
	Hammer
	Harami
	Harami Cross
	Homing Pigeon
	Inverted Hammer
	Kicking
	Ladder Bottom
	Mat Hold
	Matching Low
	Meeting Lines
	Morning Doji Star
	Morning Star
	Piercing Line
	Rising Three Methods
	Separating Lines
	Side by Side White Lines
	Stick Sandwich
	Three Inside Up
	Three Line Strike
	Three Outside Up
	Three Stars In the South
	Three While Soldiers
	Tri Star
	Unique Three River Bottom
	Upside Gap Three Methods
	Upside Tasuki Gap

Three Outside Up

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Pattern: reversal
Reliability: high

Identification
A bullish Engulfing pattern is followed by a white day whose close is higher than the second day.

The Psychology
In a downtrend or during a pullback within an uptrend, a bullish Engulfing pattern forms. By itself the pattern has moderate reliability as a reversal indicator, but when the it is followed by another white day (preferably on strong volume), the overall pattern becomes much more reliable.

The Three Outside Up may be a continuation of the bullish Engulfing.

Since bullish Engulfing patterns have decent reliability when played at support, Three Outside Up formations have high reliability when they form in the same situation. Here, FMXI rallied and then gave back about 50% of its gains. The stock then formed a bullish Engulfing pattern and followed it up with a another up day to complete the Three Outside Up pattern, and the stock proceeded to bounce over 30% in just one week.

Here is another example of the high reliability bullish Three Outside Up pattern forming at a level that was previously established as support. Note the volume surges.

TEVA was bouncing around in pretty volatile fashion when it formed a bullish Three Outside Up pattern which ended the consolidation period and began the next leg up for the stock.

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