Three Rising Valleys

Core idea

Three rising valleys is the bullish mirror of three falling peaks: three minor lows, each strictly higher than the prior, all sharing similar shape and width. The pattern confirms when price closes above the highest peak between the valleys. By definition it always has an upward breakout — a close below the lowest low first invalidates the pattern.

The pattern is interpreted as a sign that buyers are stepping in earlier on each successive pullback. Each higher low is a quiet announcement that the demand floor has risen. When price finally clears the highest intervening peak, the announcement becomes a commitment and the breakout follows.

Why it matters

Three rising valleys performs especially well in bull markets, ranking 6th in average rise and 8th for low failures (where 1 is best). The average rise is a strong 48%, roughly double the 22% seen in bear markets. The pattern works as both a continuation (in an existing uptrend) and a reversal (at the end of a downtrend), but continuations in bull markets are the highest-probability variant.

Where it appears

Most three rising valleys form within an uptrend, where they act as continuations. The pattern marks a period of consolidation in which the uptrend's structure remains intact even as price retraces three times. Less commonly, the pattern appears at the bottom of a downtrend, where the third valley marks a true reversal. Both variations confirm the same way: a close above the highest intervening peak.

Why throwbacks matter

Two out of three trades experience a throwback — price returns to the breakout level within about 12 days. Throwbacks hurt average performance: trades without one outperform those that do. But for bull-market patterns, 81% of throwbacks ultimately resume the upward trend, so a throwback is rarely a reason to exit unless it fails to push higher.

Key takeaways

Mental model

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Practical application

Trading the pattern

Tall vs wide, oddly

Bulkowski's stats show that tall and narrow three rising valleys outperform in bear markets, while short and wide patterns outperform in bull markets. The counterintuitive read: in a hostile bear market you need a high-conviction sharp setup; in a friendly bull market a broader, slower pattern has more room to develop into a sustained rise.

Example

A consumer-goods stock declines from $60 to $40 over four months, then puts in a valley at $40, rallies to $46, returns to a higher valley at $43, rallies to $48, and forms a third valley at $45.

• Confirmation line: $48 (the highest intervening peak).
• Entry trigger: daily close above $48.
• Stop: $39.50 (below the lowest valley). Risk: about 18% from entry.
• Realistic target: the prior $60 high — about a 25% move. With 48% average rise in bull markets, this is conservative.
• Throwback management: if price returns to $48 within two weeks, hold unless it closes back below $48 within three days.

The trade-off: the stop is wide (the lowest valley is well below entry) but the target is large. If the stop seems too painful, the alternative is to wait for the throwback, enter at $48 with a stop at $45 (just below the third valley), and accept that you miss the trades that never throw back. About a third of trades will be missed this way.

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