Three Outside Up Pattern: The Candles at Amazon's February 2026 Low and Applied Materials' September 2025 Low

On February 18, 2026, a day after Amazon ended its longest losing streak since 2006, it completed a three outside up at its lowest price since May 2025. Bought at that close with a stop under its low, the trade risked 4.3%. By May 6, a record close, the stock was up 34.3%.

On September 5, 2025, three weeks after a 14.1% drop on its outlook, Applied Materials completed one at its lowest price since May 2025 too. The risk was 5.1%. By February 25, 2026, also a record close, the stock was up 142.7%.

Neither stock has traded below its pattern's low since. Here is how to read a three outside up, where the stop goes, and how to find the next one.

What $10,000 became#

Prices are split-adjusted, as on the chart.

The three outside up in one table#

A three outside up is three daily candles: a red day, a green day whose body swallows the red body, then a green day that closes higher still. The first two days are a bullish engulfing: buyers take back the whole red day. The third day confirms it: they keep buying.

These are the rules the VCP Scanner terminal uses to name a three outside up on a daily chart.

Day 1 can be any size. Amazon's was red by 9 cents; Applied Materials' fell 1.80 from its open.

The position rule matters most. A three outside up comes after a decline. The same three bars upside down after a rally are a three outside down, and read bearish.

Three outside up and its look-alikes#

The three inside up is the same idea with a weaker second day: day 2's body sits inside day 1's, a bullish harami, and day 3 has to close above day 1's open. The morning star puts a small middle day below day 1's close.

Example 1: Amazon (AMZN) at the end of its longest losing streak since 2006, Feb 13-18, 2026#

Open AMZN in the VCP Scanner terminal →

Amazon had fallen nine sessions in a row, 18.2%, after it said it would spend about $200 billion this year, much of it on AI. Day 1 was the ninth fall. Day 2 ended the streak: it opened 66 cents under day 1's close and closed 2.27 above day 1's open. Day 3 closed 3.64 higher.

What followed:

• Next session (Feb 19): closed at 204.86, +0.0%.
• Feb 20: 210.11, the first close above the pattern's high of 206.86.
• Ten sessions later (Mar 4): 216.82, +5.9%.
• Mar 27: a low of 199.14, 3.14 above the stop. The stop held.
• May 6: 274.99, +34.3%, a record close. That is 8.0 times the 8.79 risked on each share.
• Aug 3: 284.02, +38.7%.
• The low of 196.00 was never broken. On Nov 3, 2026 Amazon closed at 250.69, 22.4% above the pattern's close.

There was not one 5% gap on the way to May 6. The move from there to Aug 3 came with a 12.5% gap on Jul 31, the day after its earnings, about three-eighths of the 120-session run.

With $500 at risk, the stop sized the trade at 56 shares, about $11,468. At the Aug 3 close those shares were up $4,437.

Example 2: Applied Materials (AMAT) at its September 2025 low, Sep 3-5, 2025#

Open AMAT in the VCP Scanner terminal →

Applied Materials dropped 14.1% on Aug 15, 2025, when its forecast fell short on weaker demand from China. Three weeks later it made this low. Day 2 opened 31 cents under day 1's close and closed 19 cents above day 1's open. Day 3 closed 4.51 higher.

What followed:

• Next session (Sep 8): closed at 162.05, −0.4%.
• Sep 9: 163.50, the first close above the pattern's high of 162.85. Its low that day, 161.75, is the lowest it has traded since.
• Ten sessions later (Sep 19): 190.10, +16.8%.
• Dec 1: 254.75, +56.5%.
• Feb 25, 2026: 394.95, +142.7%, a record close. That is 28.0 times the 8.28 risked on each share.
• The low of 154.47 was never broken. On Nov 3, 2026 Applied Materials closed at 381.92, 134.7% above the pattern's close.

Its one 5% gap in the first 60 sessions, on Sep 18, was about a ninth of that rise. Over 120 sessions, three gaps up made up about three-tenths of the run: Sep 18, Jan 15 (the day TSMC raised its spending plans) and Feb 13 (the day after its earnings). A gap down on Nov 14 gave some back.

With $500 at risk, the stop sized the trade at 60 shares, about $9,765. At the Feb 25, 2026 close those shares were up $13,932.

The same day, KLA#

KLA, another chip-equipment maker, completed a three outside up the same day, at a prior low: it undercut its Jun 20, 2025 low of 83.49 and closed back above it. It risked 8.1% and rose 86.1% by Jan 29, 2026. Its low has not broken either. Its one 5% gap up in that run, on Jan 15, was about an eighth of it.

Where a three outside up counts: key levels#

A three outside up on a level is a test of that level. In the terminal, the Only at a key level switch is on by default and keeps the ones that close back above one of these:

Amazon's and Applied Materials' came at fresh lows, on none of these levels. To see ones like them, turn Only at a key level off. KLA's came at a prior low, so it shows with the switch on.

Amazon and Applied Materials were both in Stage 4, Stan Weinstein's declining stage, so each pattern marked the end of a downtrend.

How to trade a three outside up#

1. Find the low. A three outside up comes after a decline. Look for it at a prior low, a rising average or a fresh multi-month low, like Amazon's in February 2026.
2. Check the bars. Day 1 is red, day 2's green body covers it, and day 3 closes above day 2. Amazon's day 2 closed 2.27 above day 1's open and Applied Materials' 19 cents.
3. Choose your entry. Some traders buy day 3's close. Others wait for a close above the pattern's high. Amazon and Applied Materials both gave that close two sessions later.
4. Put the stop under the low. Under the lowest of the three lows, or under the lowest low of the test if price went lower earlier in it. The terminal calls this "the low, test included". Amazon's risk was 4.3% and Applied Materials' 5.1%.
5. Size from the stop. Shares = money at risk ÷ (entry − stop). With $500 at risk on Applied Materials: 500 ÷ (162.75 − 154.47) = 60 shares.

Find three outside up patterns on any chart in VCP Scanner#

• Open a stock in the terminal, for example AMZN or AMAT.
• Open Candles in the chart toolbar and tick Three outside up, or use the Bullish quick pick for every bullish name.
• Only at a key level is on by default. Turn it off to see every three outside up on the chart.
• The chart jumps to the latest one. A dot marks each one under its middle bar, and the selected one shows its stop on the price scale.
• The inspector lists the dates, close, stop, risk to stop, level, volume and stage. 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 three outside up is a bullish engulfing confirmed: a red day, a green day whose body covers it, then a green day that closes higher still.
• Amazon's marked its February 2026 low and Applied Materials' its September 2025 low. They risked 4.3% and 5.1%, and the stocks rose 38.7% and 142.7% within 120 sessions.
• The pattern's low is the stop. It defines your risk before you take the trade.

Data: VCPScanner daily market data through Nov 3, 2026, split-adjusted. The examples are for education, not recommendations.