Rising Three Methods: Five-Bar Bullish Continuation

Key Takeaways

• Rising three methods is a five-bar bullish continuation: one long green candle, three small red candles inside its range, and a long green close above the first candle's close.
• Bulkowski's testing shows it continues the uptrend roughly 74 percent of the time, a respectable continuation rate.
• Steve Nison notes the pattern is more significant when volume is higher on candles one and five than on the three middle candles.
• It is the bullish twin of falling three methods and the no-gap cousin of mat hold.

What It Is

The pattern forms inside an established uptrend. Candle 1 is a long green candle that confirms the trend. The next three candles are short, ideally red, and their bodies fall within the high to low range of candle 1. Candle 5 is a second long green candle that opens above the prior close and finishes above the close of candle 1, ideally above its high.

The result on a chart is one big move, a short rest, and then a second big move. The three middle bars are sometimes nicknamed the rest stop.

The Intuition

A strong uptrend produces winners. Some take profit, some short the local high, and the market drifts down for two or three sessions on low volume. The drift is shallow because committed buyers are still bidding.

When the fifth candle prints, it confirms that the rest stop was a pause, not a top. New money pushes the close above the high of the original long candle, validating the original move and signaling that the uptrend continues.

How It Works

Identification rules:

• The market is in an uptrend before the pattern.
• Candle 1 is a long green candle.
• Candles 2, 3, and 4 are small, ideally red, and their bodies stay inside candle 1's range. Total counts of three to five middle candles are sometimes accepted by software, but classical Nison requires three.
• Candle 5 is a long green candle. Its close exceeds candle 1's close, ideally above candle 1's high.

The middle candles do not have to be strictly red. Some sources accept any small candle that stays inside candle 1's range. The trend integrity rule is the close of candle 5 above candle 1's close.

Nison, in his 1991 text, emphasizes that volume should fall on the middle candles and pick up on candle 5. Bulkowski's statistics indicate roughly 74 percent continuation reliability, with stronger performance when volume confirms.

Confirmation is the close of candle 5. Some breakout traders also require a sixth candle close above candle 5's high.

Worked Example

A stock has rallied from 70 to 85. On Monday it prints a long green candle from 85 open to 91 close, range 84.50 to 91.20.

Tuesday, Wednesday, and Thursday print three small red candles closing at 89.80, 88.90, and 88.20. None breaks below 84.50, all stay inside Monday's range. Volume is roughly two-thirds of Monday's volume.

Friday opens at 88.40 and closes at 93.10, above Monday's close. Volume is 1.5 times Monday's volume. That completes a rising three methods. Continuation traders enter on Friday's close with stops below the lowest middle candle's low.

Common Mistakes

1. Accepting middle candles that break the first candle's low. The pattern requires the middle bars to stay inside the first bar's range. A break below makes it a flag-fail or distribution shape, not a rising three methods.

2. Ignoring volume. Nison's volume rule (light in the middle, heavy on candle 5) is the most overlooked component. Patterns that ignore it have meaningfully worse follow-through.

3. Treating it as identical to mat hold. Mat hold requires a gap between candles 1 and 2 and a slight downward drift. Rising three methods has no gap requirement and the middle candles can drift sideways or down.

4. Counting too many middle candles. Classical theory is three. Some software flags four or five middle candles as the same pattern. The longer the consolidation, the less reliable the continuation read.

5. Trading it in sideways markets. Like all continuation patterns, this only works with a trend. Without a clear uptrend before the long green candle, the pattern means nothing.

Frequently Asked Questions

What is rising three methods in simple terms? Rising three methods is a five-bar bullish continuation. A long green candle is followed by three small red candles inside its range, then a fifth long green candle closes above the first, signaling the uptrend continues.

How does rising three methods affect investment decisions? Trend traders use it as a re-entry signal inside a clear uptrend. The trigger is the fifth candle's close above the first candle's close, ideally on rising volume, with stops below the pattern's low.

What is a real-world example of rising three methods? A stock prints a strong up day on heavy volume, drifts down on light volume for three sessions while staying inside that bar's range, then prints a second strong up day that closes at new highs. That five-bar shape is the rising three methods.

How can investors use rising three methods effectively? Apply a trend filter, check volume against Nison's rule (lighter middle, heavier breakout), and trigger on the fifth candle's close above the first candle's close. Use the pattern's low as the invalidation level.

How is rising three methods different from a bull flag? A bull flag is a chart pattern over many bars with a price channel; rising three methods is a precise five-bar candlestick pattern with specific size and range rules. They describe the same psychology at different timescales.

Sources

1. Bulkowski, T. "Rising Three Methods Candle Pattern." https://thepatternsite.com/Rising3Methods.html
2. ThinkOrSwim. "RisingThreeMethods Pattern Reference." https://toslc.thinkorswim.com/center/reference/Patterns/candlestick-patterns-library/bullish-only/RisingThreeMethods
3. TradingView. "Rising Three Methods - Bullish." https://www.tradingview.com/support/solutions/43000592711-rising-three-methods-bullish/
4. Investopedia. "Candlestick Charting: What Is It?" https://www.investopedia.com/trading/candlestick-charting-what-is-it/

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.