Falling Three Methods is a five-candle bearish pattern that signifies a continuation of an existing downtrend. The first candle is long and red, followed by three short green candles with bodies inside the range of the first candle. The last candle is also red and long and it closes below the close of the first candle. This decisive fifth strongly bearish candle hints that bulls could not reverse the prior downtrend and that bears have regained control of the market.
The bullish version of the Falling Three Methods pattern is the Rising Three Methods candlestick pattern.
Traditionally, this candlestick pattern is recognized in conjunction with a specific trend direction, i.e. it might be important for the pattern if the price has been generally going up or down. The ‘Detect Trend Based On’ option allows you to specify which of the following methods to use to detect the trend:
By comparing two different SMAs, the 'SMA50, SMA200' option only detects stronger trends. When the trend is weak and the condition above is not met, no patterns will be detected. In contrast, the 'SMA50' option will also detect weaker trends.