What is the three outside down pattern?
The three outside down is a bearish candlestick pattern. A bearish engulfing followed by a third candle closing lower to confirm the move.
How does the three outside down form?
A bearish engulfing followed by a third bar closing lower still.
How do you confirm a three outside down?
Engulfing plus continuation is a stronger read than either alone, because the second bar's claim survives a full session of testing.
When does the three outside down fail?
Late in an extended decline the same three bars mark the flush rather than the start of one.
No chart pattern works every time. The examples on this page were chosen because they show the pattern clearly, and in real markets patterns fail often.
Practice on real charts
3 real examples of the three outside down, cut off where the pattern completed. Make your call, then see what happened.
The shaded area is a three outside down. Where did price go next?
