An engulfing candle already swallows the one before it whole. Three outside up and three outside down add a third candle that closes beyond the engulfing candle itself — strength, confirmed by more strength.
The engulfing candle itself carried real weight in the Sakata ledgers — a full takeover, already a strong reversal candle on its own. A trader watching live still waited a session more to be sure.
Bar charts show two strong sessions in a row easily enough — but the specific engulfing-body definition that anchors this pattern isn't native to bar-chart language.
Steve Nison's 1991 catalog names three outside up and three outside down explicitly — engulfing plus a further confirming close — treated among the more reliable three-candle reversal signals.
Because it stacks two already-strong signals rather than pairing a stall with a confirmation, three outside up/down is treated as one of the more trusted three-candle reversal signals in active use.
Candle one closes a color. Candle two fully engulfs candle one's body — the reversal takeover. Candle three closes beyond candle two's close, in the same new direction.
Three outside up: after a decline, a bullish engulfing candle, then a third candle closing higher than the engulfing candle's close. Three outside down: the exact mirror, downward, after an advance.
Three inside up/down builds on a harami — a weak stall needing rescue. Three outside up/down builds on an engulfing candle — already a strong reversal signal in its own right. Confirmation stacked on strength tends to outrank confirmation stacked on a stall.
A bullish engulfing candle at the fastest bear market's low is followed within a session or two by a close beyond it — a textbook three outside up.
Near the all-time high, a bearish engulfing candle is followed by a session closing lower still, completing a strongly confirmed reversal days before the broader decline.
Amid the Q4 2018 decline, a bullish engulfing candle near the December low is confirmed further within days, ahead of the recovery.
After a decline, a bullish engulfing candle prints, then a third candle closes higher than the engulfing candle's own close. What is this?
A similar setup appears, but the third candle only closes just above the engulfing candle's low — not above its close. Is this confirmed?
Both a confirmed three inside up and a confirmed three outside up appear on different tapes, at similarly tested lows. Which deserves more weight, all else equal?
Three sessions, watched as they happen. The engulfing candle and its extra confirmation build tick by tick on the left — and the mark they leave in the ledger on the right. Confirmed at a low, at a high — and the engulfing that never got its extra push.
An engulfing candle, and a third candle at the end of it. Measure exactly where the close lands relative to the engulfing candle's close — then call it: long, short, or stand aside.
The classic error is treating every three-candle confirmation pattern as equally strong. The discipline is to recognize that this one stacks confirmation on an already-strong signal, and weight it accordingly against three inside up/down.
An engulfing candle is already a full takeover. Three outside up and three outside down add a third candle that closes even further — strength, confirmed by more strength, once the trend cracks, it tends to keep splitting.
«The force of splitting bamboo.»