Three Inside Up: A Bullish Reversal Candlestick Pattern

The Three Inside Up is a bullish reversal candlestick pattern that signals a potential shift from a downtrend to an uptrend. This pattern indicates increasing buying interest and a change in market sentiment from bearish to bullish.

👀What The Pattern Looks Like

The Three Inside Up pattern consists of three candles:

1. First Candle:

   • A long bearish (red/black) candle.
   • Indicates the continuation of the existing downtrend.

2. Second Candle:

   • A bullish (green/white) candle that forms within the range of the first candle.
   • Closes higher than its open but does not surpass the close of the first candle.
   • Represents a bullish harami pattern when combined with the first candle.

3. Third Candle:

   • Another bullish candle that closes above the high of the first candle.
   • Confirms the reversal signal.

🧠Pattern Psychology

To understand the mentality behind the formation of the Three Inside Up:

1. Initial Pessimism:

   • The long bearish candle shows that sellers still dominate the market, continuing the downtrend.

2. Seeds of Doubt:

   • The second bullish candle, forming within the boundaries of the first, suggests that bears might be losing strength.
   • Buyers are cautiously stepping in, questioning the bearish sentiment.

3. Bullish Confirmation:

   • The third bullish candle that surpasses the high of the first candle is a decisive move by the bulls.
   • This candle confirms the shift in power to the bulls, suggesting a forthcoming uptrend.

🔍Pattern Significance

The Three Inside Up pattern is a reliable hint of a bullish reversal after a downtrend. Traders often see it as an opportunity to consider long positions. However, like all technical patterns, it's crucial to use the Three Inside Up alongside other technical indicators and consider the broader market context to make informed trading decisions.