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Similar to On Neck but the rally closes just inside the prior close. Still a failed rally, still bearish.
The In Neck Line is a two-candle bearish continuation pattern. After a bearish candle in a downtrend, a bullish candle opens below the prior low and closes just at or barely into the prior candle's close — right at the 'neck' of the first candle.
The key is how little the bullish candle recovers. It opens lower (gap down) showing initial bearish continuation, then rallies — but barely reaches the prior close. This minimal recovery shows that buyers are weak and the downtrend will likely resume.
The In Neck Line shows bulls making a feeble attempt at recovery. Candle 1 is bearish — the downtrend is intact. Candle 2 opens below Candle 1's low (a gap down, initially looking bearish). Then buyers try to rally.
But the rally only manages to close at or barely above Candle 1's close — the very bottom of its body. Imagine trying to climb out of a hole and only reaching the edge. The close 'in the neck' of the prior candle shows buyers have no real power.
This is weaker than a Thrusting Line (which closes into the body but below 50%) and much weaker than a Piercing Line (which closes above 50%). The In Neck Line is essentially a failed recovery — the downtrend should continue.
Conservative: Enter short on a break below Day 2's low.
Aggressive: Enter short at Day 2's close.
Above the close of the second (bullish) candle. If price pushes significantly above this level, the bearish continuation thesis weakens.
T1: The low of the first (bearish) candle. T2: Previous swing low. The In Neck Line shows weak buying - sellers should remain in control. Trail stops as the move develops.
Minimum 1:2. The tight stop above the second candle's close creates favorable R:R.
The In Neck Line is one of a family of bearish continuation patterns (In Neck, On Neck, Thrusting) ranked by how much the bullish candle recovers. In Neck closes at the prior close, On Neck closes near the prior low, and Thrusting closes below the midpoint.
Slightly more bullish than on-neck, but still not a reversal signal. Wait for additional confirmation.
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