The Three Inside Up/Down candlestick pattern signals a potential trend reversal. The Three Inside Up is bullish, forming after a downtrend, while the Three Inside Down is bearish, appearing after an uptrend, both requiring confirmation for reliable trading decisions.
Content:
- Three Inside Up and Three Inside Down Candlestick Pattern Meaning
- How to Identify the Three Inside Up Candlestick Pattern?
- How to Identify the Three Inside Down Candlestick Pattern?
- Three Inside Up Candlestick Pattern Formation and Structure
- Three Inside Down Candlestick Pattern Formation and Structure
- Three Inside Up and Three Inside Down Candlestick Pattern for Reversals
- Three Inside Up vs Three Inside Down Candlestick Pattern
- What Is the Three Inside Up/Down Candlestick Pattern? – Quick Summary
- Three Inside Up and Three Inside Down Candlestick Pattern Meaning – FAQs
Three Inside Up and Three Inside Down Candlestick Pattern Meaning
The Three Inside Up/Down pattern signals potential trend reversals in financial markets. The Three Inside Up is a bullish pattern forming after a downtrend, while the Three Inside Down is bearish, appearing after an uptrend. Both patterns consist of three distinct candles.
In the Three Inside Up pattern, a large red candle appears first, followed by a smaller green candle within its real body, and a third green candle closing higher. This suggests the downtrend may be ending, and a bullish reversal could be underway.
Conversely, the Three Inside Down pattern begins with a large green candle, followed by a smaller red candle within its real body, and a third red candle closing lower. This signals a weakening uptrend and a possible bearish reversal, confirming selling pressure.
How to Identify the Three Inside Up Candlestick Pattern?
The Three Inside Up pattern reflects a shift in trader sentiment from bearish to bullish. Initially, a strong sell-off creates new lows, discouraging buyers while boosting seller confidence. This reinforces the existing downtrend, maintaining bearish momentum in the market.
As the second candle forms within the previous red candle’s range but closes higher, it signals hesitation among sellers. Short-sellers may begin exiting positions, sensing a potential reversal. This minor bullish movement raises caution, though full confirmation is still required.
The third candle confirms the bullish reversal, closing above the second candle. This move traps remaining short-sellers and attracts new buyers, leading to increased buying pressure. Traders interpret this as a strong bullish signal, potentially driving the price higher.
How to Identify the Three Inside Down Candlestick Pattern?
The Three Inside Down pattern begins with a large green (bullish) candle marking an uptrend. This rally leads to new highs, and traders remain confident in the bullish trend. However, the pattern’s psychology shifts with the second candle.
The second candle opens within the previous candle’s trading range but closes lower than both the previous close and the current open. This indicates hesitation among buyers and raises concerns about the strength of the uptrend, prompting some buyers to exit their long positions.
The third candle completes the bearish reversal, confirming the shift in market sentiment. As the price falls further, more long positions are sold, and short-sellers begin entering the market, anticipating continued downward movement. This creates increased selling pressure, reinforcing the bearish sentiment.
Three Inside Up Candlestick Pattern Formation and Structure
The Three Inside Up candlestick pattern is a bullish reversal signal that forms after a downtrend, indicating a potential shift from bearish to bullish momentum. The structure of the pattern consists of three distinct candles:
- First Candle – A large red (bearish) candle, confirming the ongoing downtrend and selling pressure. It sets the tone by pushing the price lower and establishes the bearish market sentiment.
- Second Candle – A small green (bullish) candle that opens within the range of the first candle’s body and closes higher. This suggests that buyers are starting to show interest, but the price movement remains contained within the previous downtrend. The second candle’s close higher than the first candle’s open raises some caution among sellers.
- Third Candle – A strong green (bullish) candle that closes above the second candle’s close. This confirms the reversal, as the price breaks higher, attracting more buyers and trapping remaining short-sellers. The third candle signifies the potential start of a new uptrend.
Three Inside Down Candlestick Pattern Formation and Structure
The Three Inside Down candlestick pattern is a bearish reversal signal that appears after an uptrend, indicating a potential shift from bullish to bearish momentum. The structure of the pattern consists of three candles:
- First Candle – A large green (bullish) candle, confirming the ongoing uptrend and indicating strong buying pressure. This sets the market sentiment in favor of buyers and pushes the price to new highs.
- Second Candle – A small red (bearish) candle that opens within the range of the first candle’s body and closes lower. This shows hesitation among buyers, as the price fails to continue higher. The second candle’s close below the first candle’s close signals a weakening of the bullish trend.
- Third Candle – A strong red (bearish) candle that closes below the second candle’s close. This confirms the reversal, as it shows that sellers are gaining control and pushing prices lower. The third candle indicates increased selling pressure, reinforcing the likelihood of a downtrend.
Three Inside Up and Three Inside Down Candlestick Pattern for Reversals
The Three Inside Up candlestick pattern is a bullish reversal signal formed after a downtrend. It consists of a large red candle followed by a small green candle within the previous body, and a strong green candle closing above the second candle, indicating increased buying pressure.
In contrast, the Three Inside Down pattern is a bearish reversal signal after an uptrend. It begins with a large green candle followed by a small red candle within the first body. The third red candle closing lower confirms a shift in market sentiment and bearish momentum.
Both patterns highlight shifts in market sentiment, with the Three Inside Up suggesting the end of a downtrend and the Three Inside Down indicating a weakening uptrend. Confirmation with volume analysis and technical indicators like RSI or MACD improves the reliability of these reversal signals.
Three Inside Up vs Three Inside Down Candlestick Pattern
The main difference between the Three Inside Up and Three Inside Down patterns lies in their directional signals. The Three Inside Up indicates a bullish reversal after a downtrend, while the Three Inside Down signals a bearish reversal after an uptrend.
| Aspect | Three Inside Up | Three Inside Down |
| Market Context | Forms after a downtrend, indicating a potential bullish reversal. | Appears after an uptrend, signaling a potential bearish reversal. |
| Candle Structure | First candle is a large red (bearish), second is a small green (bullish) within the first, and third is a strong green closing higher. | First candle is a large green (bullish), second is a small red (bearish) within the first, and third is a strong red closing lower. |
| Trend Signal | Bullish reversal, indicating the end of the downtrend and the start of upward momentum. | Bearish reversal, indicating the end of the uptrend and the start of downward momentum. |
| Confirmation | Confirmed with a strong green third candle and supported by volume analysis or indicators like RSI. | Confirmed with a strong red third candle and supported by volume analysis or indicators like MACD. |
What Is the Three Inside Up/Down Candlestick Pattern? – Quick Summary
- The Three Inside Up signals a bullish reversal after a downtrend, while the Three Inside Down indicates a bearish reversal after an uptrend. Both patterns consist of three candles, confirming trend shifts.
- The Three Inside Up pattern signals a bullish reversal, with hesitation among sellers followed by a confirming third green candle. This traps short-sellers, attracts buyers, and indicates potential upward price movement.
- The Three Inside Down pattern signals a bearish reversal, with hesitation among buyers followed by a confirming third red candle. This shift attracts short-sellers, increasing selling pressure and suggesting further downside.
- The Three Inside Up pattern signals a bullish reversal after a downtrend. It consists of a large red candle, followed by a small green candle and a strong green candle confirming the shift to upward momentum.
- The Three Inside Down pattern signals a bearish reversal after an uptrend. It consists of a large green candle, followed by a small red candle, and a strong red candle confirming the shift to downward momentum.
- The Three Inside Up signals a bullish reversal after a downtrend, while the Three Inside Down indicates a bearish reversal after an uptrend. Both patterns require confirmation through volume and technical indicators.
- The Three Inside Up signals a bullish reversal after a downtrend, while the Three Inside Down indicates a bearish reversal after an uptrend. Both require confirmation with volume and technical indicators for reliability.
- Open a free demat account with Alice Blue in 15 minutes today! Invest in Stocks, Mutual Funds, Bonds & IPOs for Free. Also, trade at just ₹ 20/order brokerage on every order..
Three Inside Up and Three Inside Down Candlestick Pattern Meaning – FAQs
The Three Inside Up pattern is a bullish reversal formation appearing after a downtrend. It consists of a small bullish candle within the previous bearish candle, followed by a strong bullish candle confirming the reversal, signaling potential upward momentum in the market.
Traders use the Three Inside Up pattern to identify potential trend reversals. It is best confirmed with volume analysis and indicators like RSI or MACD. Entering long positions after confirmation and placing stop-loss below the pattern helps manage risk effectively.
This pattern indicates a shift from bearish to bullish sentiment. The initial small candle within the bearish candle suggests indecision, while the strong bullish third candle confirms buying pressure, signaling potential upward movement and a weakening downtrend.
To trade this pattern, enter a long position after the third bullish candle confirms the reversal. Set a stop-loss below the pattern’s low and target key resistance levels. Using volume analysis and RSI can improve trade accuracy and minimize risks.
Traders use the Three Inside Down pattern to identify bearish reversals. The first candle is a strong bullish one, followed by a smaller bearish candle inside it. The third bearish candle confirms the trend reversal, signaling potential downside movement.
This pattern signals a bearish reversal after an uptrend. The small second candle within the first bullish candle shows hesitation, and the third strong bearish candle confirms increased selling pressure, suggesting further price decline and trend weakness.
The Three Inside Up pattern is bullish. It forms after a downtrend and consists of three candles confirming a potential reversal. The final strong bullish candle signals renewed buying interest, increasing the likelihood of a price rise.
The Three Inside Down pattern is bearish. It appears after an uptrend, signaling a reversal. The last strong bearish candle confirms selling pressure, indicating a shift from bullish to bearish sentiment and potential further downside.
To trade this pattern, enter a short position after the third bearish candle confirms the reversal. Set a stop-loss above the pattern’s high and target key support levels. Using technical indicators like MACD and RSI enhances trade accuracy.
No, the Three Inside Up/Down pattern does not always guarantee a reversal. False signals can occur, especially in choppy markets. Traders should confirm it with volume, RSI, and support/resistance levels to ensure reliability before making trading decisions.
We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, commodity and hence we bring you the important topics and areas that you should know:
Disclaimer: The above article is written for educational purposes and the companies’ data mentioned in the article may change with respect to time. The securities quoted are exemplary and are not recommendatory.
