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1990issue C121-2

Constructing three-session rally and reaction volume signals

Editorial framing: build the pattern in two gates. First bin every session by how its high and low sit against the prior session. Then require a three-session rally or reaction run with its volume condition, omitting ignored-sessions so the entry rule stays countable.

  • Every session is assigned to one range-relative type: rally-day, reaction-day, inside-day, or outside-day.
  • An up-signal is three consecutive rally-days, each with positive volume.
  • A down-signal is three consecutive reaction-days with increasing volume.
  • Inside-days and outside-days are ignored-sessions and are omitted from the consecutive count that forms either signal.
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Current trackCandlestick patterns100 readingsVolume-price analysis129 readingsRule-based entry174 readings

A two-gate construction

Editorial framing: treat the pattern as a two-gate procedure rather than a single glance at the chart. The first gate assigns every session to a range-relative bin by comparing its high and low with the prior session. The second gate asks for three consecutive sessions in the same rally or reaction bin, plus a volume condition, before an up-signal or a down-signal is complete.

Editorial note: that split keeps each step checkable. A session either fits one of the four bins or it does not. A candidate run either meets the three-session volume rule or it does not.

Bin every session by range

Every session is assigned to one of four range-relative types: rally, reaction, inside, or outside.

A rally-day has a high above the prior high and a low equal to or above the prior low.

A reaction-day has a high equal to or below the prior high and a low below the prior low.

An inside-day has a high equal to or below the prior high and a low equal to or above the prior low.

An outside-day has a high above the prior high and a low below the prior low.

Require a three-session volume run

An up-signal is defined as three consecutive rally sessions, each with positive volume.

A down-signal is defined as three consecutive reaction sessions with increasing volume.

The two volume conditions are not the same. The up-signal asks only that each rally-day in the run has positive volume. The down-signal asks that volume increase across the reaction-day run.

Leave ignored-sessions out of the count

Inside and outside sessions are omitted when counting consecutive rally or reaction sequences for a signal. Those inside-days and outside-days are ignored-sessions.

Editorial note: omitting ignored-sessions keeps the entry rule countable and falsifiable. The consecutive count is taken only over rally-days or reaction-days. A reader can accept or reject an up-signal or a down-signal without deciding what an inside-day or an outside-day means for the trade hypothesis.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
1 of 54 in the Candlestick patterns track
19911-7 pp.Next on Candlestick patternsConstructing candlestick real bodies and multi-session patternsDraw the real body from the session open to the session close, then add shadows as the thin high and low extensions.
All readings on this track · 54 readings
  1. 1990Constructing three-session rally and reaction volume signals
  2. 1991Constructing candlestick real bodies and multi-session patterns
  3. 1991Treat a candlestick reversal as incomplete until %D confirms it
  4. 1991Filtering candlestick signals with stochastic percent-D
  5. 1991Constructing compressed candlestick summaries
  6. 1993Intraday candlestick confirmation with oscillators
  7. 1993Candlestick hypotheses from a 1993 reading list
  8. 1994License candlestick signals with oscillators and weekly vetoes
  9. 1995Real-body support, resistance, and close-through breakouts
  10. 1997Weekly reversal as a three-part hypothesis
  11. 1998Turning fear levels into testable rules with a psychological matrix
  12. 2000Evaluating three-bar reversal reliability
  13. 2000Prior-day candles, open confirmation, and same-session stops
  14. 2000Intraday candlestick volume confirmation for daytrading
  15. 2001Count the key reversal up before coding a mechanical exit
  16. 2001Rising and falling three continuation candle construction
  17. 2002Treat a moving average as a contested fence
  18. 2003Candlestick signals need support and a risk-reward screen
  19. 2003Constructing one-day reversal tops and bottoms
  20. 2003Chart sentiment as a regime filter for hourly stochastic entries
  21. 2004Confirming index reversals with candlesticks, stochastics and averages
  22. 2004The harami inner close as a reversal barometer
  23. 2004Constructing a true-range volume power-shift filter
  24. 2005Weighing reversal clusters against moving-average support
  25. 2005Candlestick exits confirmed by overbought stochastics
  26. 2005Confirming piercing patterns with stochastics and moving averages
  27. 2006Candlestick cluster exits confirmed by overbought stochastics
  28. 2007Three black crows become a trade hypothesis only after regime, trend and nearby levels
  29. 2008Asymmetrical RSI lookbacks for divergence and candle confirmation
  30. 2008A permission checklist for the end of a trend
  31. 2010Mechanical entries still need confirmation gates
  32. 2010Crude oil as a case study in candlestick session reading
  33. 2010Gold weekly candles and the thousand resistance breakout
  34. 2010A three-layer gold chart drill from waves to candle confirmation
  35. 2011Why entry scans fail without trend filters
  36. 2011Price-zone oscillator trend-regime rules
  37. 2011A candlestick checklist before commodity entries
  38. 2013Step candle construction at price turning points
  39. 2013Two-bar step-candle construction
  40. 2014Small-range bars as a timed volume-climax hypothesis
  41. 2014Constructing volume-scaled candlestick charts
  42. 2015Weekly range midpoints as support and resistance
  43. 2015Constructing weekly body-midpoint pattern codes
  44. 2015Evaluating encoded candlestick sequence hypotheses
  45. 2015Constructing a breakout relative-strength index from two-day range candles
  46. 2016A three-gate classroom on hourly sterling
  47. 2016Fibonacci retracement as a pre-commitment stop map
  48. 2017Nine-zone filter for decade-level breakouts
  49. 2017Constructing pin-bar and inside-bar setups
  50. 2017Two-bar soldier and crow rules become a system only after filters and exits
  51. 2017Confirm a one-white-soldier or one-black-crow before entry
  52. 2018Session control from marubozu and engulfing geometry
  53. 2019Volume, acceleration, and candle filters on a completed double bottom
  54. 2019Sector-filtered candlestick scans and predrawn stops
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