Bearish Three Inside Down

The Bearish three inside down pattern is a bearish reversal indicator. This pattern consists of three different days.

The first day is a large up day. The second day the stock drops down as is unable to bring itself back up. In fact this day should close down a little. The first two days form a pattern by itself called the Bearish Harami pattern.

The third day the pattern breaks down lower and closes below the second day. This gives off a bearish signal.

Why does the Bearish three inside pattern work? Basically this pattern is just confirmation for another pattern the Harami. The second day of the pattern shows that there is weakness in the uptrend and that things are likely to turn around. The last day confirms the pattern by going lower and showing ongoing weakness in the market.

Aggressive traders will trade this pattern before the third day because if the pattern does follow through you will miss a chance to short the stock prior to the third day and collect a larger profit from the initial move as well as any downward movements after it.

However a more conservative trader may want to wait for the confirmation to the downside made by the third day before taking any action.

The best thing to do is to find a strategy that fits you the best. It is also a wise idea to use this indicator along with other similar indicators.

Similar Patterns

Here are a few similar candlestick patterns that you can use when determining if a given trend is likely to reverse or to go up.

Bullish Separating Lines - A 2 Day Trend Continuation pattern to the upside.

Three Black Crows - A 3 day Bearish Indicator.

Downside Tasuki Gap - A bearish indicator.