Definition
Bullish Three Outside Up is also called Confirmed Bullish Engulfing formation. The third day confirms the ascending market trend.
- Trend: Reversal
- Expected trend: Bullish
- Previous trend: Bearish
- Reliability: High
- Type: Bullish
- Number: 3
Recognition
- The market is in a downward trend.
- The first two days form a Bullish Engulfing pattern.
- The third is a white candle, closing above the second candle’s closing price.
Interpretation
The first two candles are already warning traders about a possible trend reversal because the second white candle covers the trading range of the previous candle. Similar formation can be observed in the Bullish Engulfing pattern as well. If the price increase lasts until the third day and the last candle’s closing price is above the second day’s closing price, the trend reversal is confirmed.
Important factors
The formation is highly reliable, but a confirmation is necessary (may come from a white candle with higher closing price or gap).
