Three inside up patterns are bullish patterns. They are a four candlestick pattern that takes place near support levels. The first candlestick is a larger bearish candlestick. The next three candlesticks are bullish and each have a candlestick close above the previous one. Look for price action to rise above the fourth candle and hold for bullish continuation. Watch our video on how to identify and trade three inside up patterns.
What Is a Three Inside Up Pattern & How to Identify These Patterns?
A three inside up pattern consists of four candlesticks that form near support levels. The 1st candle is bearish, the 2nd is a spinning top or doji that forms a bullish harami, and the other 2 candles form higher highs. Typically, the 4th candle forms a bullish reversal pattern.
These patterns are made up of three candlesticks. The three inside up pattern is a bullish reversal pattern. There are many different reversal patterns. Watch our video above to learn more about how to trade this pattern.
The 3 inside up also contains another bullish reversal pattern known as the bullish harami. A bullish harami pattern is a two candlestick pattern. In other words, the three inside up pattern is a bullish harami pattern with a confirmation candle.
Stock charts are made up of candlestick patterns. These candlesticks tell a story whether by themselves or grouped together.
The market is basically a practice in buying and selling emotion. In essence, we make or lose money based of emotion. Greed and fear move markets.
This is been the case all the back to the 17th century rice trade. Japanese rice trader realized he needed a way to measure emotion versus supply and demand. For this reason we have now use Japanese candlesticks patterns to trade with (bookmark our penny stocks list and stock watch lists pages, which are updated daily).
Basics of Three Inside Up Patterns
Three inside up patterns are three candlesticks patterns. First you need a downtrend to be in place. The downtrend doesn’t have to be a long term one either. Sometimes a short term downtrend is all you need.
Second, a bearish candlestick forms in keeping with the downtrend. It should have a long real body but of course patterns aren’t always perfect.
Third, you get a small candle the second day that forms inside the first candle. Also known as a bullish harami. Harami is the Japanese word for pregnant. So this technically looks like pregnant lady.
Lastly, you get the confirmation candle. This should be a bullish candlestick. This candle should close above the candle from the previous day. Read our post on bullish candlesticks.
In essence, traders may trust the three inside up pattern more than a bullish harami because you get that confirmation candle. It’s easier to trust because of the assurance it’s given. Looking to learn stock training? Take our free stock market trading courses to help you get started.
Technicals of Three Inside Up Patterns
The bears are in control when three inside up patterns begin to form. Trading is about the tug of war between the bulls and the bears. When one side doesn’t like what the other side is doing, they come in to take over (try our stock picks service free for 14 days).
Three inside up patterns are a pretty accurate signal of a reversal. If you see it on a chart you can rest assured price should move up. No we all know that patterns can break down.
Because of this, traders may wait for even more confirmation before placing an order. This can occur in the form of a gap up the fourth day or another big bullish candlestick.
The longer real body of the second candle, the stronger the reversal. Likewise, the longer the real body of the confirmation candle the more strong and secure the reversal. Take our candlestick reversals course.
Three inside up patterns have a confirmation candle included but getting technical confirmation is a good thing. If you’ve been taking the candlesticks course, you know how important candlesticks are to technical analysis.
Moving average lines don’t mean anything without candlesticks. Nor does support and resistance. Candlesticks are the foundation to trading. They provide support and resistance along with moving averages. These are levels traders pay particular attention to.
Notice how traders react when price is trading around moving average lines; especially those like the 50 and 200 SMA’s. You may notice a lot of patterns occurring around moving average lines as well as away from them.
Price that has moved away from moving averages is always going to come back to them whether above or below. RSI will also alert you to a stock being oversold or overbought.
When a stock is overextended it will correct itself. These are the clues traders look for and pay attention to. If you want to be a successful trader, you’ll learn to as well (bookmark our stocks lists page which is updated daily).
How to Trade Three Inside Up Patterns
- How to trade three inside up patterns:
- Watch for 1st bearish candlestick to form
- Next, watch for 2nd smaller spinning top or doji candlestick to form
- Then, watch for 3rd & 4th candlesticks to form higher highs
- Traders take a long position once price breaks above the 4th candlestick
- Place stop below the 4th candle
- Some traders take a short position once price breaks below 4th candle
- Then place stop above the 4th candle
Three inside up patterns are strong bullish reversal patterns. They are a smaller candlestick pattern so look to see what larger pattern they’re inside of. Bullish and bearish patterns form within each other all the time. Knowing where a three inside up as in regards to V bottom patterns or bear pennants can be the difference between a breakout or breakdown.