All patterns

Outside day, down close

Price action · Beginner · Daily bars · Popularized by Larry Williams

A panic outside bar engulfs the prior range and closes weak — buy above its high next day on seller exhaustion.

An outside day engulfs the entire prior range and closes at the lows — maximum fear on the tape. You wait for proof that sellers are exhausted.

How to trade it (bullish)

  1. Setup: Find an outside day (higher high and lower low than yesterday) that closes down — a capitulation bar.
  2. Entry: Next day, buy stop above the outside bar's high. You only enter if buyers break that level.
  3. Stop and exit: Stop at the outside bar's low. Exit at target or with a trailing stop.

How to trade it (bearish)

  1. Setup: Find an outside day (higher high and lower low than yesterday) that closes up — a euphoria bar.
  2. Entry: Next day, sell stop below the outside bar's low. You only enter if sellers break that level.
  3. Stop and exit: Stop at the outside bar's high. Exit at target or with a trailing stop.

Why it works

An outside-down day is capitulation — sellers overwhelmed the whole prior range and closed at the lows. Trading back above the outside bar's high means the sellers are spent and buyers have reclaimed the fear bar.

Watch out for

In a hard downtrend, exhaustion can be temporary — use a target/tight trail. Strongest version also has D.close < D-1.low.

Pairs well with

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Popular markets for this pattern: Silver, Wheat, Soybeans, Oats, Feeder Cattle, USD/CAD, DIA