Three Inside Up/Down

A classic indicator among candlestick chart readers is the three inside up/down. It’s where three candlesticks show stagnation, a potential indication of a reversal on the horizon.

Three inside up candlesticks suggest the beginning of a bullish trend. In order to see this, there has to be a current downtrend. Then the first large, black candlestick shows up. The second is white (showing upward momentum) and small, with the body opening and closing within the body of the first big black candlestick. The third and final candlestick is another white, which closes higher than the close of the second little white candlestick.

The three inside down candlesticks is the same, but in exact reverse: we’ve got an upward trend that might be going down. That means seeing a large white candlestick followed by a little black and a larger black with the closing price of the third being lower than the closing of the second.

Keep in mind that the three inside up/down is only the suggestion of a potential reversal. No guarantees. Like all candlestick analysis, this tool is best used in conjunction with other tools rather than alone.

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