Technical Glossary / Candlestick Patterns
Three Outside Up
A bullish engulfing confirmed by a third candle that closes higher.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
Three outside up begins with a bullish engulfing: a down candle, then an up candle whose body covers it. The third candle closes above the second candle's close. The engulfing is the reversal. The third bar checks that the next period agreed.
How to identify it
Bar two engulfs bar one's body and is bullish. Bar three makes a higher close than bar two. A third candle that stalls inside bar two is not confirmation.
Bullish reading
A higher close after the engulfing says the turn was not a one-bar event. The low of the engulfing bar remains the invalidation.
Bearish reading
A break of that low fails the pattern even if the third candle looked strong at the time.
Common mistakes
Counting three up candles without an engulfing second bar. The outside bar is required.
Limitations
You are entering after two strong bars. Measure the distance to the pattern low before deciding the confirmation is affordable.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.