Continuation patterns: rising and falling three methods, and the three line strike
Almost every pattern so far has been a reversal. This module is about the patterns that record a pause inside a trend and resolve in the trend's direction. The rising three methods is a wide bullish candle followed by two or three small bearish candles that stay inside its range, then a wide bullish candle that closes above the first candle's high. The falling three methods is the mirror. Both are the candlestick version of a flag: the trend side made a wide push, the other side could only produce small candles that failed to leave the push's range, and the trend side then resumed. The three line strike is the unusual one: three trend candles followed by one wide candle that erases all three, after which the trend is expected to resume. All of these form constantly on gold intraday, where a London trend pauses through the New York open and continues in the afternoon. The module states the rules, explains what the pause records, and sets the breakout entry and stop.
What a continuation pattern is
A continuation pattern records a trend that pauses without being reversed. The test is simple: during the pause, the counter-trend side had its chance and could not do much with it. In candle terms that means the counter-trend candles are small, and they stay within the range of the last wide trend candle. If the pause breaks that range against the trend, it has become something else, a reversal in progress or a range. If the pause stays inside and the trend side then prints another wide candle that closes beyond the pause, the trend has continued. This is why the inside bar from Module 8 is the simplest continuation structure and why the rising three methods is really a sequence of inside candles with a specified resolution. The important mental shift is that in a continuation pattern the small candles are the information: their failure to make progress is the pattern. A trader who sees three small red candles in an uptrend and reads a top has missed that the three candles together could not retrace one green one.
Rising three methods
The rising three methods is five candles in its classic form. The first is a wide bullish candle in an uptrend. The second, third and fourth are small candles, usually bearish, each with a body inside the range of the first candle; they may drift lower but their lows stay above the first candle's low. The fifth is a wide bullish candle that opens above the fourth close and closes above the first candle's high. The rules that matter: the small candles must stay inside the first candle's range, ideally inside its body; the fifth candle must close above the first high, not merely be bullish; and the first and fifth candles should both be wide relative to the average true range. On gold the pause is often two candles rather than three, and sometimes four; the count is less important than the containment. A rising three methods on the H1 chart during a London uptrend, with the pause across the New York open, is one of the most common and useful shapes the metal prints.
Falling three methods
The falling three methods is the mirror in a downtrend. A wide bearish candle, then two or three small candles, usually bullish, whose bodies stay inside the first candle's range, then a wide bearish candle that closes below the first candle's low. The same rules apply: containment of the small candles, a fifth candle that closes beyond the first extreme, and width on the first and fifth. On gold the falling version is common during New York afternoon declines, where a wide red H1 candle is followed by a few small green candles as the market tries to bounce, and a further red candle resolves the pause. The small candles in a falling three methods are worth reading closely, because a bounce that produces a long upper wick on one of them, a small shooting star inside the pause, shows that the attempt to rally was itself sold, which increases confidence that the pause will resolve down. A bounce whose candles grow in size and reach the first candle's open is not a falling three methods; it is a pause that is turning into something else, and the pattern should be abandoned.
The three line strike
The three line strike is a four-candle pattern and the odd one out. The bullish version is three consecutive bullish candles, like three white soldiers, followed by a wide bearish candle that opens above the third close and sells off to close below the first candle's open, erasing all three. The classic reading is that this is a continuation pattern: the strike candle is a sharp, one-period profit-taking event and the uptrend is expected to resume. The bearish version is three crows followed by a wide bullish candle that erases them. Treat this pattern with more caution than the three methods. A candle that erases three periods of trend in one go is a very large piece of counter-trend information, and on gold it is often the first candle of a reversal rather than a pause. The honest use of the three line strike is as a question: after the strike candle, does the next candle hold above the strike candle's low and resume, in which case the continuation reading was right, or does it follow through, in which case the strike was a bearish engulfing of three candles and should be read as one. Do not trade the strike itself as a continuation entry.
The rules that matter
Across all three patterns, three rules decide whether the name applies. First, containment: the pause candles stay inside the range of the wide trend candle that preceded them, and the best versions stay inside its body. A pause candle that closes beyond the trend candle's range against the trend ends the pattern. Second, resolution: the pattern is complete only when a wide trend candle closes beyond the trend candle's extreme, above the first high in the rising version, below the first low in the falling version. A bullish candle that closes inside the first candle's range is not a resolution. Third, proportion: the pause candles should be clearly smaller than the trend candles, each with a range well under the average true range, while the trend candles should be at or above it. A pattern where the pause candles are nearly as large as the trend candle is a range, not a pause. These rules exist to prevent the most common misuse, which is calling any dip in an uptrend a rising three methods and buying it. The pattern is defined by what the dip failed to do, and that has to be measured.
Where they form on gold intraday
Continuation patterns on gold have a daily rhythm. The most common rising or falling three methods on the H1 chart is the London trend that pauses from about the New York pre-market until the first hour of New York, then resumes. The wide first candle is the London push, the small candles are the quiet hours as the United States comes in, and the fifth candle is the New York session confirming the direction. A second cluster appears on H4, where a wide candle in one session is followed by a contained Asian session and a resumption at the next London open. Knowing this rhythm helps in two ways. It tells you when a pause is likely to be a pause rather than a reversal, since a quiet pre-market pause after a strong London trend is the normal state. And it warns you that the resolution candle often coincides with United States data, so the fifth candle can be violent and the entry should be planned, not chased. Mark the session boundaries on the live chart and watch how often the pause sits exactly between them.
Entry, stop and target
The entry for the three methods is the close of the resolution candle, above the first high for a rising three methods, below the first low for a falling one. A more aggressive entry is a close beyond the pause candles' extreme, the highest high of the small candles, which gets in earlier with more false starts; use it only when the pause has formed at a level that supports the trend, such as a prior swing or the first candle's midpoint. The stop goes beyond the pause extreme: below the lowest low of the pause candles for a long, above the highest high for a short, with an allowance for spread. The idea is invalidated when the pause is traded through against the trend, and that is where the stop belongs; placing it below the first candle's low is also valid but wider. The first target is the next structural level in the trend direction, and a measured target projects the height of the first candle from the breakout point. Continuation entries have a natural advantage on gold: they trade with the session's direction and against a pause that has already shown weakness, and the reward check in Module 16 usually passes comfortably because the stop is close.
FAQ
What is the rising three methods pattern?
A wide bullish candle in an uptrend, then two or three small candles, usually bearish, whose bodies stay inside the first candle's range, then a wide bullish candle that closes above the first candle's high. It records a pause in which sellers could not retrace the push, followed by the trend resuming. The falling three methods is the mirror.
What is a three line strike?
Three consecutive trend candles followed by one wide candle that erases all three. The classic reading is continuation, but a candle that undoes three periods in one is large counter-trend information. Treat it as a question answered by the next candle: a hold and resumption confirms continuation, a follow-through makes the strike a reversal.
How many small candles are needed in a three methods pattern?
The classic form has three, but containment matters more than the count. Two or four small candles that stay inside the first candle's range work the same way. What ends the pattern is a pause candle that closes beyond the first candle's range against the trend.
Where does the stop go on a continuation trade?
Beyond the pause extreme: below the lowest low of the small candles for a long, above the highest high for a short, with an allowance for spread. The idea is invalid when the pause is traded through against the trend. A stop beyond the first candle's extreme is also valid but wider.
When do continuation patterns form on gold?
Most often on the H1 chart as a London trend pauses through the New York pre-market and resumes in the first New York hour, and on H4 as a session push pauses through Asia and resumes at the next London open. The resolution candle often lands on United States data, so plan the entry rather than chase it.