Falling Three Methods Candlestick Pattern: The Pause Before PayPal's 2021 Fall and SoFi's 2026 Slide
Anish DasUpdated Nov 8, 20269 min read
Falling three methodsLesson 42 of 44 · Gaps and continuationOpposite: Rising three methods
- Reads
- Bearish
- Five candles
On September 13, 2021, seven weeks after its record close, PayPal fell on a long red day. It spent three sessions resting inside that day's range, and on September 17 it closed below that day's close. Sold at that close with a stop above September 13's high, the trade risked 3.9%. By March 7, 2022 PayPal was down 66.1%, at its lowest close since April 2020.
On January 6, 2026, SoFi fell 7.9% after completing a $1.5 billion stock sale, and printed the same five-day shape by January 12. That trade risked 10.2%. By March 30, 2026 SoFi was down 43.0%, with no gap down of 5% or more along the way.
The falling three methods is a bounce that never gets going. Neither stock has traded above its pattern's high since. Here is how to read one, where the stop goes, and how to find the next one.
What the fall cost#
A falling three methods is a sell signal for holders and an entry for short sellers.
$10,000 held through the fall$3,387
- Sold at day 5's close
- 276.34
- Stop
- 287.19, day 1's high (3.9% risk)
- Next session
- −2.3%
- Ten sessions later
- −4.2%
- Lowest close within 60 sessions
- −35.1% (Dec 1, 2021)
- Lowest close within 120 sessions
- −66.1% (Mar 7, 2022)
- Reward for each $1 risked on a short
- $16.84
- High taken out since?
- Never
$10,000 held through the fall$5,695
- Sold at day 5's close
- 26.60
- Stop
- 29.30, day 1's high (10.2% risk)
- Next session
- +2.0%
- Ten sessions later
- −4.3%
- Lowest close within 60 sessions
- −43.0% (Mar 30, 2026)
- Lowest close within 120 sessions
- −43.0% (Mar 30, 2026)
- Reward for each $1 risked on a short
- $4.24
- High taken out since?
- Never
The $10,000 and reward rows use the 120-session numbers. Prices are split-adjusted, as on the chart.
The falling three methods in one table#
A falling three methods is five daily candles: a long red day, a three-day pause that stays inside it, then a long red day that closes lower. Buyers try a bounce, can't get back above the first day, and sellers push on.
These are the rules the VCP Scanner terminal uses to name a falling three methods on a daily chart.
| Part | Rule |
|---|---|
| Day 1 | A red candle with a long body: at least half the 14-day ATR |
| Days 2 to 4 | Each body half of day 1's or less, each high and low inside day 1's range |
| The drift | Day 4 closes above day 2: the pause leans up |
| Day 5 | A red candle with a long body that closes below day 1's close |
| Position | None: it counts anywhere |
| Stop | Just above the pattern's high, day 1's high, drawn by the terminal |
The middle days can be any colour. It is rare: on 132 large US stocks the terminal found it 15 times from 2015 to November 2026.
The falling three methods and its look-alikes#
| Pattern | What it needs | Reads as |
|---|---|---|
| Falling three methods | A long red day, a pause inside it, a long red day to a lower close | Bearish |
| Pause breaks day 1 | One of the middle days trades over day 1's high | No signal |
| Rising three methods | A long green day, a pause inside it, a long green day to a higher close | Bullish |
| Three black crows | Three long red days in a row, each closing lower | Bearish |
Day 2 is always an inside day, and days 3 and 4 stay inside day 1 too. A day 5 with almost no shadows is also a bearish marubozu, and the terminal lists it under Also. Neither example had another name. The mirror image is the rising three methods.
Example 1: PayPal (PYPL) at its 2021 top, Sep 13 to 17, 2021#
Open PYPL in the VCP Scanner terminal →
| Fact | PYPL, Sep 13 to 17, 2021 |
|---|---|
| Day 1, Sep 13: open / high / low / close | 286.72 / 287.19 / 277.80 / 280.49, down 1.3% |
| Day 2, Sep 14 | 281.84 / 283.17 / 279.71 / 282.24 |
| Day 3, Sep 15 | 284.21 / 285.75 / 279.50 / 282.43 |
| Day 4, Sep 16 | 281.04 / 283.69 / 280.39 / 282.97 |
| Day 5, Sep 17 | 282.18 / 282.50 / 275.92 / 276.34, down 2.3% |
| Place | 10.4% under the Jul 23, 2021 record close of 308.53; no key level |
| Stop | 287.19, day 1's high |
| Risk to stop | 3.9% |
| Volume on day 5 | 1.30× the 50-day average |
| Stage | 2 |
PayPal had set its record in July 2021. Its three-day bounce never closed above 282.97, and day 5 gave it all back.
What followed:
- Next session (Sep 20): closed at 269.91, down 2.3%, its first close below the pattern's low of 275.92.
- Ten sessions later (Oct 1): 264.65, −4.2%.
- Dec 1, 2021: 179.32, −35.1%, its lowest close since Sep 18, 2020.
- Mar 7, 2022: 93.61, −66.1%, its lowest close since Apr 3, 2020. That is 16.8 times the 10.85 risked on each share.
- The high was never taken out. The highest PayPal has traded since is 279.95. On Nov 6, 2026 it closed at 59.24, 78.6% below day 5's close.
Three gaps down did about a third of the fall to March 7: the biggest on Feb 2, 2022, the morning after PayPal's fourth-quarter report cut its outlook. One gap up, on Oct 25, 2021, gave back about a twentieth.
With $500 at risk, the 10.85 stop sized a short at 46 shares, about $12,712. At the Mar 7, 2022 close the short was up $8,406.
Example 2: SoFi (SOFI) after its stock sale, Jan 6 to 12, 2026#
Open SOFI in the VCP Scanner terminal →
| Fact | SOFI, Jan 6 to 12, 2026 |
|---|---|
| Day 1, Jan 6: open / high / low / close | 29.23 / 29.30 / 26.03 / 26.98, down 7.9% |
| Day 2, Jan 7 | 26.87 / 27.18 / 26.37 / 27.00 |
| Day 3, Jan 8 | 27.00 / 28.06 / 26.57 / 27.72 |
| Day 4, Jan 9 | 27.81 / 28.38 / 27.23 / 27.40 |
| Day 5, Jan 12 | 27.29 / 27.32 / 26.20 / 26.60, down 2.9% |
| Place | 17.4% under the Nov 12, 2025 record close of 32.21; no key level |
| Stop | 29.30, day 1's high |
| Risk to stop | 10.2% |
| Volume on day 5 | 0.78× the 50-day average |
| Stage | 2 |
Day 1 came after SoFi completed a stock sale of about $1.5 billion at $27.50 a share, on 1.85 times the average volume. The bounce reached 28.38 but never got back to day 1's open.
What followed:
- Next session (Jan 13): closed at 27.14, up 2.0%.
- First close below the pattern's low (Jan 20): 25.49, five sessions later.
- Ten sessions later (Jan 27): 25.46, −4.3%.
- Mar 30, 2026: 15.15, −43.0%, its lowest close since Jun 17, 2025. That is 4.2 times the 2.70 risked on each share.
- The high was never taken out. The highest SoFi has traded since is 27.33. On Nov 6, 2026 it closed at 16.21, 39.1% below day 5's close.
The whole fall to March 30 came without a gap down of 5% or more: SoFi lost 43.0% one session at a time.
With $500 at risk, the stop sized a short at 185 shares, about $4,921. At the Mar 30, 2026 close the short was up $2,118.
Where a falling three methods counts: key levels#
A falling three methods at a level is a bounce turned back at resistance. In the terminal, the Only at a key level switch is on by default and keeps the patterns at one of these:
| Level | What it is |
|---|---|
| A prior high | A swing high at least 10 sessions old that price trades above for the first time, then closes back below |
| A failed breakout's pivot | The pivot of a breakout that failed, met again from below |
| The 50-day from below | The 50-day moving average, falling, with the stock in Stage 3 or 4 |
| The 21-day EMA from below | The 21-day exponential average, under a falling 50-day, in Stage 3 or 4 |
Neither example sat on one of these levels. To see patterns like them, turn Only at a key level off.
Both stocks were still in Stage 2, Stan Weinstein's advancing stage, when the pattern printed. A falling three methods in Stage 2 marks a top forming inside an uptrend: a place to take profits or tighten a stop as much as a place to short.
How to trade a falling three methods#
- Find the long red day. It is often a news day: SoFi's was its stock sale.
- Watch the bounce. The next three days must stay inside day 1's high and low, with small bodies, and drift up.
- Choose your entry. Some traders sell day 5's close. Others wait for a close below the pattern's low. PayPal gave that close the next session, SoFi five sessions later.
- Put the stop above day 1's high. The terminal draws it there. If price breaks above the whole pattern, the pause has failed.
- Size from the stop. Shares = money at risk ÷ (stop − entry). With $500 at risk on SoFi: 500 ÷ (29.30 − 26.60) = 185 shares.
A short carries more risk than a long: a stock can gap up past the stop overnight.
Find the falling three methods on any chart in VCP Scanner#
- Open a stock in the terminal, for example PYPL or SOFI.
- Open Candles in the chart toolbar and tick Falling three methods.
- Only at a key level is on by default. Turn it off to see every one on the chart.
- The chart jumps to the latest one and shades its five days. A dot marks it above its high, and the selected one shows its stop on the price scale.
- The inspector lists the close, stop, risk to stop, level, volume and stage, and other names under Also. Walk through the others with the ← and → keys.
- Mark the ones you care about with the drawing tools. The arrows in the charts above are the Arrow Marker (Alt+A): click where the arrow starts, then click the candle.
Candles are free, on daily, weekly and monthly charts.
Bottom line#
- A falling three methods is a long red day, a three-day bounce inside it, and a long red day to a lower close. It is a rare continuation pattern.
- PayPal's after its 2021 record and SoFi's after its January 2026 stock sale risked 3.9% and 10.2%. PayPal fell 66.1% within 120 sessions, SoFi 43.0% within 60.
- Day 1's high is the stop. It defines your risk before you take the trade.
Data: VCPScanner daily market data through Nov 6, 2026, split-adjusted. The examples are for education, not recommendations.
Quick answers
What is a falling three methods?
Five daily candles. A long red day, three small days held inside its high and low that drift up, then a long red day that closes below the first day's close. It reads as a short pause inside a move down.
Do the three middle days have to be green?
No. The terminal checks their size, not their colour. Each body must be half of day 1's body or less, all three must stay inside day 1's range, and day 4 must close above day 2. PayPal's middle days were green, red and green; SoFi's were green, green and red.
Where does the stop go on a falling three methods?
Just above the pattern's high, which is day 1's high. The terminal draws it there. PayPal's stop was 3.9% above day 5's close, SoFi's 10.2%.
Is the falling three methods common?
No. On 132 large US stocks it formed 15 times from 2015 to November 2026, a little more often than the rising three methods (13).
What is the bullish version?
The rising three methods. A long green day, three small days held inside it that drift down, then a long green day that closes above the first day's close. See the rising three methods article for Rocket Lab's and GE Vernova's in 2025.
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