Three Inside Up Pattern
By: Stephanie
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Three Inside Up Japanese Candlestick Pattern
The Three Inside Up is a strong 3 candle reversal pattern occuring during a downtrend and is the confirmation signal of a Bullish Harami and the opposite signal of a Three Inside Down Pattern.
The first two candles are a Bullish Harami, a two day pattern that has a small body day completely contained within vertical range of the previous larger candle's body.
This formation suggest that the previous trend is coming to an end.
The Bullish Harami is confirmed by a third white candlestick, with a higher close than the second day. This is the Three Inside Up signal.
Rules to identify the Three Inside Up pattern:
- The downward trend has been fairly consistent for a good period of time.
- The first candlestick is in the direction of the trend (a black candlestick).
- The second candlestick is white and contained in the previous day's body.
- The third candlestick is white and closes higher than the second day.
Potential Signal Strengtheners:
- The smaller the body of the second candlestick, the more indecision of the market.
- The larger the body of the second candlestick, the stronger chance of a reversal.
- The higher the third day closes, the stronger the chance of a continued reversal.
General Analysis and Investor Sentiment:
After a downtrend, this pattern suggests an uptrend will likely occur. The strength of this formation consists of the fact that the Harami pattern indicates the trend has stopped. Large volume trading on this day could indicate a shift in investor sentiment, thus the Bears are succumbing to the Bulls. The third day shows the strength of the reversal, and the more Bears sell off positions and the more Bulls that go long, the higher the candlestick closes. This would provide confirmation of the reversal.
Thats it for the Three Inside Up Japanese Candlestick Pattern.
