Interruption, Not Reversal
The candlestick charts, like all tracking charts, are meant to allow investors to see and interpret market activity at a glance. Through these charts, investors are able to step back from the individual trades and observe the large picture of fluctuations. In this way, they can make more education deductions about whether patterns like the falling three methods are a mere interruption in the trend they were following, or whether they need to be on the lookout for a reversal which could stymie their plans for creating a profitable portfolio. .
If you’re going to be able to maintain a strong investment history, you’re going to have to learn how to spot the falling three methods as well as other candlestick patterns in the market. Generally, candlesticks that are white indicate a bullish move, while red or black candlesticks indicate a bearish move. This pattern will begin with a long black candle that is followed by a series of white, or upward, candles. The series of white candles will form within the range of the original candle, but they will always have smaller bodies. It’s important that the trend before the pattern be established before determining what actions to take..
It’s important to be familiar with the characteristics of this pattern, because it allows you to determine if buyers are lacking enough conviction to stop or reverse the current trend. Some active traders also use it as a signal to add additional holdings to their short positions.