The Three Inside Down is a bearish reversal candlestick pattern that typically forms at the top of an uptrend. It indicates a shift in momentum from bullish to bearish and warns of a potential trend reversal to the downside.
🕯️ Structure of the Three Inside Down Pattern
It consists of three candles:
- First Candle:
- A long bullish (green/white) candle.
- Confirms the ongoing uptrend.
- Second Candle:
- A small bearish (red/black) candle.
- Opens and closes within the body of the first candle (an inside bar).
- Forms a Harami pattern (a potential reversal signal on its own).
- Third Candle:
- A strong bearish candle.
- Closes below the close of the second candle, ideally below the low of the first candle.
- Confirms the bearish reversal.
▲ ← Strong Bullish Candle
▼ ← Small Bearish Candle (inside previous)
▼ ← Large Bearish Candle (closes below both)
📉 Interpretation
- First candle: bulls are still in control.
- Second candle: momentum slows; indecision or early selling pressure appears.
- Third candle: sellers take over and confirm that a downtrend may begin.
✅ Confirmation Factors
- Appears after a clear uptrend.
- Third candle closes decisively lower.
- Better confirmation if accompanied by:
- High volume on the third candle.
- Resistance level rejection.
- Bearish divergence on RSI/MACD.
🔁 Related Pattern
| Pattern | Signal | Opposite Pattern |
|---|---|---|
| Three Inside Down | Bearish | Three Inside Up (Bullish) |
⚠️ Pro Tip
- Don’t trade based on this pattern alone. Combine it with other technical indicators, support/resistance analysis, or volume confirmation for higher probability setups.
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