What it is
The Three Inside Up is a bullish reversal pattern consisting of three candles. It begins with a large bearish candle, followed by a smaller bullish candle that forms within the body of the first (a Bullish Harami), and concludes with a third bullish candle that closes above the first candle's open.
This pattern essentially combines a Bullish Harami with a confirmation candle. The third candle validates the reversal signal suggested by the harami, providing a higher-probability entry than the harami alone.
The psychology
The story of the Three Inside Up is one of confirmed reversal. The first candle shows strong selling pressure, with bears firmly in control and driving price lower.
But on the second day, something changes. The candle opens within the prior body and closes higher — still within the first candle's range, but the failure to continue lower signals that selling pressure is exhausting. This is the harami, the 'pregnant' pattern, carrying within it the seed of reversal.
The third candle is the verdict. Buyers push price above the first candle's open on increasing volume, confirming that the balance of power has shifted. The bears had their chance and couldn't follow through. Three candles tell a complete story: dominance, hesitation, reversal.
Identification
- 01Prior downtrend — Pattern must appear after a meaningful decline
- 02Large first candle — Bearish candle with a substantial real body
- 03Second candle inside first — Bullish candle whose body is contained within the first candle's body
- 04Third candle closes above first open — Bullish candle confirming the reversal
- 01Volume increase on Day 3 — Confirms buyer conviction
- 02Support confluence — Pattern at key support, trendline, or Fibonacci level
- 03RSI divergence — Bullish divergence adds confirmation
- 04Extended prior downtrend — More selling exhaustion = stronger reversal signal
- 01No prior downtrend — Pattern needs bearish context to reverse
- 02Second candle not inside first — Must be a valid harami
- 03Third candle fails to close above first open — Incomplete confirmation
- 04Low volume throughout — Lack of participation weakens the signal
Execution framework
Conservative: Enter long on a break above Day 3's high.
Aggressive: Enter long at the close of Day 3.
Below the low of the first (bearish) candle. The mother candle's low is the invalidation — if price breaks it, the bullish reversal has failed.
T1: Previous swing high or resistance. T2: Measured move equal to the first candle's body projected upward. The three-candle confirmation adds reliability over a basic harami.
Minimum 1:2. The built-in confirmation candle makes this more reliable than a standalone bullish harami.
Context matters
The Three Inside Up is a bullish reversal pattern that essentially combines a Bullish Harami with a confirmation candle. Its reliability comes from the three-candle confirmation structure, but like all reversal patterns, it needs proper trending context to be meaningful.
- 01After a sustained downtrend, especially near support
- 02When the second candle (inside bar) forms on declining volume
- 03At a known support level, demand zone, or Fibonacci retracement
- 04If the third candle closes above the first candle's open on increased volume
- 05With bullish divergence on RSI confirming weakening bearish momentum
- 06On daily or weekly timeframes where patterns carry more weight
- 01In a strong downtrend where rallies have been quickly sold
- 02At no significant technical level (random mid-trend occurrence)
- 03When volume doesn't support the pattern (no increase on third candle)
- 04On lower timeframes in choppy, range-bound price action
- 05If the inside candle barely fits within the first candle's body
- 06When the overall market or sector trend is strongly bearish
This is a harami with confirmation. The third candle's close above the first candle's open seals the bullish reversal. Wait for Day 3 — the harami alone is only a suggestion.
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