The Stock Stethoscope

The “Falling Three Method” is a bearish candlestick pattern that indicates a potential continuation of a downtrend. It is a five-candle pattern that occurs after a downtrend.

Here’s how to identify the Falling Three Method pattern:

1) The first candle is a long bearish candle that closes near the low of the day.

2) The second, third, and fourth candles are small bullish candles that trade within the range of the first candle. These three candles are called the “falling three.”

3) The fifth candle is a long bearish candle that closes below the low of the first candle.

The Falling Three Method pattern suggests that the market is taking a pause after a strong bearish move, and buyers are trying to enter the market. However, the bears regain control, and the downtrend continues. This pattern is similar to the Bullish Three Method pattern, but it is a bearish version.

Traders can use the Falling Three Method pattern to enter short positions or add to existing short positions. They can set a stop loss above the high of the first candle or above the high of the falling three. Traders should also look for confirmation signals, such as bearish indicators or resistance levels.

It is important to note that like all candlestick patterns, the Falling Three Method pattern is not 100% accurate and should be used in conjunction with other technical analysis tools and risk management strategies.