What it is
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 psychology
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.
Identification
- 01Prior downtrend — Must be in a declining market
- 02Candle 1 — Bearish candle with a meaningful body
- 03Candle 2 — Bullish candle opening below Candle 1's low
- 04Close at the neck — Candle 2 closes at or barely above Candle 1's close
- 05Minimal penetration — Close doesn't reach into Candle 1's body significantly
- 01Low volume on Candle 2 — Rally is weak
- 02Below a recently broken support — Overhead resistance
- 03Candle 2 is small — Weak buying effort
- 04In a strong downtrend — Multiple lower highs and lows
- 01Close reaches Candle 1's midpoint — That's a Thrusting Line or Piercing Line
- 02No prior downtrend — Needs bearish context
- 03Strong volume on Candle 2 — Significant buying effort changes the picture
- 04Candle 2 closes well into Candle 1's body — Too much recovery
Execution framework
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.
Context matters
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.
- 01In a strong, established downtrend
- 02Low volume on the bullish candle
- 03Below a recently broken support level
- 04Candle 2's rally is clearly feeble
- 05On daily charts
- 06With bearish momentum on higher timeframes
- 01Near major support where a real reversal could occur
- 02High volume on the bullish candle
- 03If the close exceeds the prior candle's body midpoint
- 04On very low timeframes
- 05In a sideways market
- 06If followed by continued bullish action
Slightly more bullish than on-neck, but still not a reversal signal. Wait for additional confirmation.
Compare the full pattern set
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