Three Inside Up and Three Inside Down
These two opposite patterns are as well of reversal nature. The “Up” pattern is bullish and occurs at market bottoms, while the “down” pattern is bearish and forms at peaks. We will discuss the Up pattern and skip the Down because they are the same, apart from the bullish/bearish perspective.
The Three Inside Up pattern forms at the end of a downtrend, often coinciding with a support level. However, it does not necessarily indicate that a reversal is about to happen, it can also precede just a pause or retracement.
The first candle has a large bearish body, while the second, smaller, candle is a bullish spinning top or a Doji, forming a Harami pattern from the two. The smaller candle should close at least at the middle of the previous ones body.
After that, a third, bullish candlestick breaks upward and closes above the body of the first big, bearish candle. The signal would be even stronger if it closes above the high of the first candle. Here is how it looks.
This pattern is considered as one of the most powerful triple candlestick patterns. It is very similar to the Evening and Morning Stars, but it is even stronger, because the middle candle has not even managed to score a new high or low when the opposing counterpart (bears,bulls) fall in control. Moreover, by the beginning of the third period, the new masters are already in complete dominance and have pushed the price even more, compared to the movement in the Evening and Morning Stars, where we needed the third candle to have penetrated 2/3 or 3/4 of the first candles height.