Granthara04.03.11Three outside up and three outside down

Every price in Part 04 comes from an unnamed vegetable market and is a teaching example. Nothing here is a quote, a recommendation, or a record of any listed company.

04.03.11 · Three outside up and three outside down

PreviouslyThree inside up is a harami plus a third board that closes above the first board's open.

The same test, on firmer ground.

Thursday's tired little board, and Friday's board that swallowed it whole. You met both in 04.03.04 and the prices have not changed. This lesson asks the same question 04.03.10 asked: what does Saturday add?

And because the ground is firmer, the test adds less. That is the whole of the lesson.

Updated

₹0.70
of new ground on Saturday, against ₹0.80 that Friday had already taken back
Part 04 · Reversal Patterns
  1. 04.03.01 Doji family: standard, long-legged, dragonfly, gravestone
  2. 04.03.02 Hammer and hanging man
  3. 04.03.03 Inverted hammer and shooting star
  4. 04.03.04 Bullish and bearish engulfing
  5. 04.03.05 Harami and harami cross
  6. 04.03.06 Piercing line and dark cloud cover
  7. 04.03.07 Morning star and evening star
  8. 04.03.08 Tweezer tops and bottoms
  9. 04.03.09 Doji stars and the abandoned baby
  10. 04.03.10 Three inside up and three inside down
  11. 04.03.11 Three outside up and three outside down
  12. 04.03.12 Tristar, two crows, and the upside-gap variant
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Learn

The pair you already have a name for

Thursday: opens ₹30.00, closes ₹29.50, another small tired day at the end of a falling week. Friday: opens lower at ₹29.20, and by the bell has run to ₹30.30 — a body that covers the whole of Thursday's, top and bottom, and closes on the other side of it. That is the bullish engulfing of 04.03.04, unchanged.

Now add Saturday. It opens ₹30.35, runs to ₹31.20, closes ₹31.00 — above Friday's close. The three boards together are what the literature calls three outside up.

The structure is exactly 04.03.10's. A two-board reversal shape, then a third session that either follows through or does not. Only the foundation has changed: an engulfing where the harami used to be.

See it

Thursday, Friday, Saturday

The first two boards are 04.03.04's engulfing, to the paisa. Watch what the third one actually contributes.

Granthara's rules engine returns three outside up. Its nearest miss is a bullish kicker at 3 of 4 rules, which needs Friday to open above Thursday's open rather than below it.

Learn

Why this third board earns less than the last one did

Put the two lessons side by side and something useful falls out.

In three inside up, the harami said only that the fall had stopped — nobody pressed lower. The third board did real work: it took back every price the first session's sellers had won. Without it you had an absence; with it you had an event.

In three outside up, Friday had already done that work. The engulfing reclaimed Thursday's whole body and closed through the other side of it before Saturday opened. By the time the third board arrives, the reclaiming is finished, and all Saturday adds is and then it kept going — seventy paise of new ground on top of a move that had already turned.

So the same test, attached to two different shapes, buys two different amounts of information. This is worth carrying past candlesticks entirely: confirmation is worth what the thing it confirms had left unsettled, and no more.

A third board on an engulfing mostly confirms what the second board already said.

Learn

Three outside down, and the price of waiting

The mirror runs the same way. A small rising board, then a falling one that engulfs it, then a third that falls further and closes below the second's close: three outside down.

In the example the engine verifies, the second board takes ₹30.50 down to ₹29.70 and the third carries it to ₹29.00. Again the second board did the turning and the third only extended it.

Which raises the cost question from 04.03.10 more sharply here. Waiting for Saturday on an engulfing means giving up the seventy paise Saturday moved, in exchange for an observation that largely repeats Friday's. Whether that trade is worth making is not a candlestick question — it is Part 20's, and it depends on how often the third board fails to arrive at all.

Learn

What the three boards permit

They permit you to say a falling week was interrupted by a session that reclaimed the previous one entirely, and that the session after it went further in the same direction. Both halves are on the board.

They do not permit you to say the fall has ended. Three outside up is described everywhere as a confirmed bullish reversal, and the word confirmed is doing work the arithmetic cannot support: nothing here measures Monday.

And they do not permit you to treat the name as more evidence than the shape. Three outside up is an engulfing, plus one more session. If you already acted on 04.03.04, this lesson has told you nothing new about the trade — only that it has so far continued.

The shortcut this gives youAlmost every three-board reversal in the catalogue is a two-board shape plus a follow-through session. Learn the two-board shapes properly and ask one question of the third — how much did the pair leave unsettled? — and the three-board list stops being a list to memorise.
Remember

Three outside up is the bullish engulfing of 04.03.04 with a third rising board that closes above the second's close; three outside down is the mirror. Because the engulfing has already reclaimed the previous body, the third board adds far less than it does to a harami — the same confirmation is worth whatever the pair beneath it had left unsettled, and no more.

Everything this chapter has told you, in order

  1. 04.03.01Open and close nearly meet; shadows and context complete the picture.
  2. 04.03.02One shape, two names: the trend that came before it supplies the name.
  3. 04.03.03Flip the shape and the rule is unchanged: the trend before it supplies the name.
  4. 04.03.04Engulfing is one body swallowing the one before it and closing the other way.
  5. 04.03.05Harami is engulfing in reverse: one relationship read in two directions.
  6. 04.03.06Partial engulfings, named at a threshold somebody chose rather than found.
  7. 04.03.07Multi-candle patterns are the same handful of shapes, seen across more boards.
  8. 04.03.08A tweezer is a level tested twice, seen at two-candle scale.
  9. 04.03.09Doji stars and the abandoned baby
  10. 04.03.10Three inside up and three inside down
  11. 04.03.11Three outside up and three outside down
Next
04.03.12 — Tristar, two crows, and the upside-gap variant

Next: the last of the reversal names, including one that needs three sessions in which nothing at all was settled.