Understanding Candlesticks_12. 3 Insideup 3 Inside Down Pattern

Lesson 12: 3 Insideup 3 Inside Down Pattern

Three Inside Up refers to a bullish reversal pattern depicted by three
candlesticks, the first candlestick is long and bearish, the second is bullish that
closes at least at the midpoint of the first candle - and the third is a bullish candle
that closes above the opening price of the first candle, creating a new high. Because
this is a bullish reversal signal, we will only look for it in a down-trend.

Here you can see in a down-trend, that a long bearish candle appears as bears
try to take out the support level. The next session shows that the bulls are trying to
take control as they manage to push the price up to the midpoint of the first candle.

Note that this is not yet a reversal signal. As is often the case after the second
session’s recovery, bears take control again and manage to create a new low. That’s
why we need to wait for the third session which closes above the first day’s open,
signaling that the bulls are taking full control.

On the other side of the trend, we can find the opposite signal known as the
Three Inside Down. In the first session is a long bullish candle, in the second
session is a bearish candle that closes at least at the midpoint of the first - and the
third candle is the actual reversal that closes below the first candle’s opening price,
confirming reversal.