What are the Rising Three Methods?

Key Highlights

• The rising three methods candlestick shows a five-candle continuation pattern. The first candle is green, indicating an uptrend. It is followed by three short red candlesticks, which indicate a temporary bearish trend.
• Rising three methods candlestick patterns are bullish patterns that occur when the market's prices are rising.
• If the rising three methods fail to maintain the bullish trend, combine them with other technical indicators to create a foolproof trading strategy.

What is the Rising Three Methods Candlestick Pattern?

Rising three methods candlestick patterns are bullish continuation patterns that occur only when the market is uptrending and shares are rising. The rising three methods candlestick shows a five-candle continuation pattern but not a long-term reversal of the current bullish trend. It means that the rising three methods candlestick pattern signifies that prices may temporarily fall but will rise again in the future as the uptrend continues after the three methods candlestick ends.

The rising three methods can be identified by five candlesticks. The first candle is green, indicating an uptrend. It is followed by three short red candlesticks, which indicate a temporary bearish trend. Afterward, the fifth long green candle concludes the rising 3 methods and signals the continuation of the bullish trend.

Understanding the Rising Three Methods Candlestick Pattern

When the market is witnessing a rise in share prices, a rising three-method candlestick pattern may appear. As a result of positive investor sentiment and increased buyer interest, prices are on the rise. The uptrend is likely to continue in such a case.

Nevertheless, the bears try to take control of the market from the bulls and force the prices down from their current levels. The uptrend continues until the first green candle, and bulls are in control. Following the first long candle, the market opens with negative sentiment, and the bulls lose confidence to push the market higher.

Three short red candles reflect the increased control of the bears and the decreased conviction of the bulls. As a result, buyer pressure fades, and buying volume decreases, which drives down prices. As the bears fail to sustain the current downtrend, the bulls again take control of the market on the last day. Consequently, buyer interest increases along with its volume over the selling volume, resulting in the continuation of the bullish trend. This is reflected in the fifth long green candle.

Example of Rising Three Methods Candlestick Pattern

Assume a stock is trading at Rs 400 and has increased from Rs 250 in two weeks. Investors expected it to rise higher, but it tanks and drops to Rs 372, 350, and 330 in three days. On the chart, if you can identify the rising three methods, you can tell that this is a temporary consolidation, and the bullish trend will continue. The stock follows the rising three methods' ideology and goes to Rs 355 again the next day, indicating that the bullish trend will continue, and it may reach Rs 400 in the near future.

Important Points to Remember about Rising Three Methods

1. Upon confirmation of the rising three-method candlestick pattern, an investor can hold or buy more of the stock.
2. The first and second candles could also be bullish marubozu candlesticks - meaning they do not have wicks or shadows above or below. The opening price of the trading session is low, whereas the closing price is high.
3. In addition, the fifth candlestick should not break the low of the first candlestick. In the rising three methods, the high of the fifth should be higher than the high of the first. This means the bulls are now dictating market terms related to security.
4. In the rising three candlestick pattern, the fifth candlestick should have more volume than the first. There is little significance in the volumes of the second, third, and fourth candlesticks.

Strategy for Rising Three Methods

A rising three methods candlestick pattern can help you determine when to enter or exit a particular trade. When the fifth candle closes, you may enter the market, as it indicates that the bullish trend will continue and the price will rise further. In addition, you can also enter a trade once the price has moved above the high of the final fifth candle. If your risk appetite is high, you can consider entering a trade before the final fifth candle. However, it is important to be prepared to exit the trade if the last candle fails to confirm the pattern, which indicates a bearish trend.

When trading the rising three methods, it is important not to identify them beneath the key resistance level. This is a vital consideration because it ensures that the bullish trend can continue and sustain itself after the fifth long candle. Additionally, the rising three methods are more likely to succeed if the wicks of the first candle, which represent the high and low price for the period, are shallow and form above a whole number.

Whenever you are trading, you should place a stop-loss below the low of the fifth candle or below the low of the second short candle. You can place the stop loss immediately below the first bullish candle if you want to give your trade some room to move. It all depends on your risk appetite and how much profit potential you want to leave for your trades when determining where to place the stop loss.

Conclusion

Rising three methods candlestick patterns are bullish patterns that occur when the market's prices are rising, indicating that the uptrend may revert for a short period but may continue after the reversal is complete. As the rising three methods may fail to sustain the bullish trend, it is recommended that you use other technical indicators along with the rising three methods pattern to create a foolproof trading strategy.