Falling Three Methods

When sad-bear is dominating the market, making stocks tumble to the forest floor, investors might look to the “Falling Three Methods” to see if they’ll keep falling.

The Falling Three Methods is a candlestick pattern that seeks to predict the continuation of a downward trend in a stock.

As you can probably guess, there are three factors to the Falling Three Methods. One: the first candlestick is a long, black one that’s clearly within a downturn. Two: after that one, there are three little white candlesticks that look like stair steps going upward, all within the length of the first long black one. Three: after the little white stairs to heaven, there’s another long black candlestick, kind of like the first, but lower.

What’s going on here? The first long black one is a sign of a selloff...panic, panic! The three little white steps upward indicate that some buyers are trying to push that price back up, getting in on the game as the stock is going “on sale.” Finally, the next long black one signals that, yep...it’s still going down, down, down. The bull buyers are no match for the bear sellers.