Three Inside Up

The three inside up candlestick pattern is a bullish reversal pattern that suggests that the previous trend is ending and it is another name for a confirmed bullish harami candle . What this means is that the first two candles are a bullish harami, and the third white candlestick is the confirmation of the bullish trend reversal. If you are unfamiliar with the bullish harami and the bearish candlestick harami , you should read about these patterns first. Understanding these patterns first will make it easier to identify this new secondary pattern.

There is certain criterion that must be met in order for this candlestick pattern to be identified. First, the market must be in a downtrend. Second, the bullish harami pattern must be identified in the first two days. This means that the first candlestick is black and is going in the direction of the trend, and the second candlestick is white and contained in the previous day’s body. Lastly, on the third day, there should be a white candlestick with a higher close than the second day.

What does the three inside up signal indicate is occurring in the markets?
This signal indicates that the downtrend is reversing and there is a shift in investor sentiment due to large volume trading. The bears are giving in to the bulls with the third day showing the actual strength of the reversal. The higher the candlestick closes on the third day the more the bulls are continuing to go long as the bears sell off their positions.

The strength of this signal is enhanced when certain things occur. For instance, the larger the body of the second candle, the stronger the chance of a reversal occurring. Conversely, a smaller body of the second candlestick means that there is indecision in the markets. Lastly, there is a stronger chance of a continued reversal the higher the third day closes. Basically, there is more support to the bulls if the third candlestick is able to stay above the low of the second candlestick. The third candle indicates the overall strength of the reversal three inside up pattern.

Japanese Candlesticks are the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals and you know how to read stock charts , expand your expertise by learning the various secondary Candlestick Patterns . Combine these with your favorite Technical Analysis indicators, such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or Exchange Traded Funds .

Please continue your candlestick pattern education and read about the Three Inside Down pattern.