Three inside up candles
When studying candlesticks in depth we find that some candles resemble each other, in this article we will discuss one of the strongest patterns that does not need other candles to confirm it, called the three outside down pattern which in shape resembles the bullish abandoned baby pattern as we will see.
So what are the conditions for this pattern to form?
Where does it appear?
What is the psychology behind its formation?
How do we trade using this pattern?
Definition of the Three Inside Up pattern:
It consists of 3 candles. The first candle is bearish with a large body. The second candle is a green bullish candle, and its open and close prices are within the body of the first candle, just like the bullish abandoned baby pattern. The third candle is the most important, as a green bullish candle must close above the bodies of the first and second candles. This pattern appears in support areas to reverse a downward trend into an upward one.
Psychology behind its formation:
At the end of a downtrend, a large bearish red candle forms, showing strong selling pressure. Then, a second candle forms inside the first candle, indicating buyer entry, as buyers were able to halt selling and even close within the first candle’s body.
The third candle shows that buyers have taken control of the trend, changing the direction from bearish to bullish, indicated by the third candle closing above the bodies of the first and second candles.
How to trade using this pattern?
When the pattern appears in a support area, within an uptrend for example, we enter a buy trade immediately after the pattern forms, place the stop loss below the pattern, and set the target as shown in the chart, which is 3 times the stop loss.
