The Stock Stethoscope

The “Three Inside Down” candlestick pattern is a bearish reversal pattern that occurs after an uptrend. It is made up of three candles, with the first two candles being relatively small and the third candle being a long bearish candle that closes below the first candle’s low.

Here are the key features of the Three Inside Down candlestick pattern:

1) The pattern begins with an uptrend, with a long bullish candle that closes near its high.

2) The second candle is a relatively smaller bearish candle that opens and closes within the range of the previous candle. It indicates a potential slowing of the uptrend.

3) The third candle is a large bearish candle that engulfs the previous two candles and closes below the low of the first candle, confirming the trend reversal.

Here is an illustration of the Three Inside Down pattern:

The Three Inside Down pattern suggests that the market is losing bullish momentum, and that the bears are taking control. Traders may look to short the market or exit long positions to take advantage of the potential downtrend.

It’s important to note that, like all candlestick patterns, the Three Inside Down pattern should be confirmed with other technical indicators and analysis before taking any trading action.