Candlestick patternsThree Inside Up
A bullish harami with a confirming third up-candle — a validated bottom reversal.
Works best in trending marketsEngine-computed on a fixed sample series
What Three Inside Up is
Three Inside Up is a three-candle bullish reversal pattern that appears at the bottom of a downtrend and signals that the decline is likely turning up. It is a bullish harami with a built-in confirmation candle. The first two candles form the harami — a long down-candle followed by a small up-candle whose body sits entirely inside the first — which flags that the downtrend has stalled and sellers are losing their grip. The third candle then supplies the confirmation the raw harami lacks, closing above the high of the second candle to prove that buyers have followed through and seized control. Embedding the confirmation into the pattern makes it more reliable than a bullish harami alone, which only hints at a bottom without proving one. It answers the question: the downtrend paused, but did buyers actually take over, or was that just a dead-cat pause before more selling?
How the pattern forms
The pattern develops over three candles at the end of a downtrend. The first is a long down-candle in the direction of the trend, with sellers still firmly in command. The second is a small up-candle whose entire body is contained within the body of the first — the harami, or inside candle — representing a sudden loss of downward momentum as the range narrows and sellers hesitate. The third candle is an up-candle that closes above the high of the second candle, confirming that the hesitation has resolved into buying. The move from the confident first down-candle to the shrinking second candle marks the stall, and the decisive third candle breaking higher marks the reversal being confirmed. The progression from downside strength to indecision to upside follow-through is the psychological arc the three candles trace.
Reading it, step by step
Start with context: the pattern must follow a genuine downtrend to be a valid bottom reversal. Spot the harami first — a long down-candle then a small up-candle nested within it — which alerts you that selling momentum has stalled. The decisive read is the third candle: it must close above the second candle's high to confirm buyers have taken over, and the further above it closes, the stronger the signal. A third candle that only marginally clears the harami high signals thin momentum and a weaker reversal, so judge the quality of that close carefully. Because confirmation is part of the pattern, you can act on the third candle without waiting for another, though checking that the close is convincing rather than marginal is wise. The read is stall, then confirmed upside follow-through from a downtrend into a turn.
Best timeframes and context
Three Inside Up, like other candlestick reversals, is most reliable on daily and weekly charts where each candle reflects real commitment and noise is lower than on intraday timeframes. There are no numeric settings, only judgement about the containment of the harami and the conviction of the third candle's close. The pattern is stronger when it forms at a clear bottom — into support, after an extended decline, or at a prior swing low — where a reversal is plausible on independent grounds. Volume that contracts on the harami candle and expands on the confirming third candle reinforces the read, showing sellers thinning and buyers stepping in. It is weaker in the middle of a range or when the third candle barely clears the harami high. Where the pattern sits in the larger structure, and how convincing the confirmation is, matter most.
When and where to use it
Use Three Inside Up as a bullish reversal signal at the bottom of a downtrend in liquid markets on daily charts, both to cover shorts and to time long entries. It is most valuable when it coincides with a support zone or other evidence that the downtrend is exhausted. Its built-in confirmation makes it appealing to traders who want a candlestick reversal that has already been partly validated rather than a single-candle bet on a bottom. Avoid it where there is no genuine prior downtrend, since a bottom reversal needs a decline to reverse, and be cautious when the third candle is weak, which undermines the very confirmation the pattern is valued for. As with all candlestick signals, it is a short-term read best deployed inside a broader framework rather than traded blindly on its own.
Strategies that use it
The primary strategy enters long on or just after the close of the confirming third candle, with a stop below the low of the first candle — the bottom of the pattern — and a target at the nearest resistance above. Because the confirmation is embedded, no further wait is required. A second, more conservative strategy waits for a higher open or a break above the third candle's high before entering, demanding extra proof of follow-through for a slightly later fill. A third approach uses the pattern purely as a signal to cover shorts and protect profits, treating the confirmed stall as a reason to exit bearish positions even without going long. In every version, the first candle's low is the logical invalidation level, and a decisive third-candle close raises the odds the reversal sticks.
Combining it with other indicators
The pattern becomes more trustworthy when independent tools agree a bottom is forming. Support from a prior low, a round number, or a rising longer-term moving average gives the reversal a logical location and makes it far stronger than one in open space. A momentum oscillator such as RSI showing bullish divergence into the low, or turning up from oversold as the harami forms, corroborates the fading downside momentum. Volume that contracts on the harami and expands on the confirming candle supports the handover from sellers to buyers. A break of a short-term downtrend line on the third candle adds structural confirmation. The candlestick pattern supplies the precise timing and the stall-then-reversal read, while support, momentum, and volume supply the independent evidence that the downtrend is truly turning up.
Where it fails
The pattern needs a genuine prior downtrend, and taken in the middle of a range or after a weak decline it reverses little of importance. Its most common quality failure is a third candle that only marginally closes above the harami high, which signals thin momentum and frequently precedes a resumption of the downtrend rather than a durable bottom — gauging the strength of that close is the key defence. A harami whose second candle is not truly contained within the first weakens the setup. On thin or news-driven instruments a spike can override the signal. And because it is a short-term candlestick read, a powerful larger downtrend can overwhelm it, so buying a Three Inside Up against a strong decline is risky. Requiring a real bottom, a convincing third close, and confirmation from support or momentum keeps the pattern reliable.
A worked example
Picture a stock in a downtrend that stalls near support at 35. The first candle is a long down-candle falling from 40 to 35, sellers clearly in control. The second is a small up-candle that opens at 36 and closes at 39, its whole body nested inside the first candle's range — a bullish harami flagging that downside momentum has stalled. The third candle opens at 39 and closes at 41, decisively above the harami high of 39, confirming buyers have taken over, and volume expands on that candle. You go long on the third close near 41 with a stop at 34.80, just below the first candle's low, targeting the prior resistance near 46. Price follows through, climbing to 45.80 over the next week, and you sell into resistance for a reward of roughly two to one on your risk — the confirmed reversal having played out cleanly from a well-defined bottom.