The Three Outside Up pattern is a bullish reversal signal. The first candlestick in the formation is a small black (red) candlestick that closes near its low. The second candlestick completely engulfs the first candlestick and closes near its high. Most often the second candlestick will display an increase in volume, from the running of stops. The third candlestick then breaks the high of the second candlestick and closes strongly.