Three Outside Up / Down

Three-bar reversal pattern. A confirmed Engulfing: the first two bars form an Engulfing pattern and the third bar confirms direction by closing beyond the second bar's close. Three Outside Up = bullish; Three Outside Down = bearish.

Quick reference

Item	Value
Family	Candlestick Patterns
Input type	Candle
Output type	f64 — +1.0 Up, -1.0 Down, 0.0 otherwise
Output range	{-1.0, 0.0, +1.0}
Default parameters	none — ThreeOutside::new()
Warmup period	3
Interpretation	Confirmed Engulfing reversal — strongest 3-bar candle reversal

Formula

Three Outside Up (+1.0):

Bar 1: red candle
Bar 2: green candle, bullish Engulfing of Bar 1
Bar 3: green candle, close > Bar 2's close

Three Outside Down (-1.0): mirror — green, bearish Engulfing, red close below Bar 2's close. See crates/wickra-core/src/indicators/three_outside.rs.

Parameters

None.

Signed ±1 encoding

This pattern already emits the uniform candlestick sign convention shared across the family — +1.0 bullish, −1.0 bearish, 0.0 no pattern — so it drops straight into a machine-learning feature matrix where the bullish and bearish variants of the pattern occupy a single dimension.

Inputs / Outputs

Indicator<Input = Candle, Output = f64>. Same shape as other three-bar patterns.

Warmup

warmup_period() == 3.

Edge cases

• Engulfing + confirmation. Bar 2 must be a valid Engulfing of Bar 1 (engulfing body, opposite direction); Bar 3 must close past Bar 2's close.
• Reset. Clears the two-bar history.

Examples

Rust

use wickra::{Candle, Indicator, ThreeOutside};

fn main() -> Result<(), Box<dyn std::error::Error>> {
    let b1 = Candle::new(11.0, 11.2, 9.8, 10.0, 1.0, 0)?;     // red
    let b2 = Candle::new(9.5, 12.0, 9.5, 11.5, 1.0, 1)?;       // green, engulfing
    let b3 = Candle::new(11.5, 12.5, 11.4, 12.3, 1.0, 2)?;     // green, close > b2.close (11.5)
    let mut to = ThreeOutside::new();
    to.update(b1); to.update(b2);
    println!("{:?}", to.update(b3));  // +1.0
    Ok(())
}

Python

import numpy as np
import wickra as ta

o = np.array([11.0, 9.5, 11.5])
h = np.array([11.2, 12.0, 12.5])
l = np.array([ 9.8, 9.5, 11.4])
c = np.array([10.0, 11.5, 12.3])

to = ta.ThreeOutside()
print(to.batch(o, h, l, c))

Node

const wickra = require('wickra');
const to = new wickra.ThreeOutside();
console.log(to.batch([11, 9.5, 11.5], [11.2, 12, 12.5], [9.8, 9.5, 11.4], [10, 11.5, 12.3]));

Streaming

use wickra::{Candle, Indicator, ThreeOutside};

let mut to = ThreeOutside::new();
let candle_stream: Vec<wickra::Candle> = Vec::new(); // your live OHLCV candle feed
for bar in candle_stream {
    if to.update(bar) == Some(1.0) { /* Three Outside Up */ }
    if to.update(bar) == Some(-1.0) { /* Three Outside Down */ }
}

Interpretation

• Strongest three-bar candle reversal. The combination of a full Engulfing plus directional confirmation produces one of the most reliable classical candlestick reversal signals.
• Pair with trend / volume. Best at trend extremes with volume expansion on the engulfing bar.
• Vs Three Inside. Three Outside starts with an Engulfing (large body on bar 2); Three Inside starts with a Harami (small body on bar 2). Different bar-2 shape → different signal feel.

Common pitfalls

• Body-only Engulfing check. Bar 2's body must engulf Bar 1's body — wicks are ignored. Same as standalone Engulfing.
• Without trend context. Even the strongest candle reversal is just noise in choppy ranges.

References

• Steve Nison, Japanese Candlestick Charting Techniques (1991).

See also

• Engulfing — unconfirmed two-bar version.
• ThreeInside — sibling three-bar Harami confirmation.
• MorningEveningStar — three-bar Doji-anchored reversal.
• Indicators-Overview — full taxonomy.