Three Inside Up and Three Inside Down: Confirmed Reversals
Three Inside Up and Three Inside Down are three-candle reversal patterns built on the Harami. They add a confirmation candle that removes ambiguity — making them more reliable than the Harami alone. The third candle's close confirms whether the reversal is genuine.
The Harami pattern tells you that the prior trend's momentum has stalled — but it leaves open whether the stall is a pause or a reversal. The Three Inside Up and Three Inside Down resolve this ambiguity by requiring a third candle to explicitly confirm the new direction. The cost is one extra day of patience; the benefit is a dramatically higher probability of being correct.
Three Inside Up (left): Harami confirmed by a third bullish candle. Three Inside Down (right): Harami confirmed by a third bearish candle.
Construction: Step by Step
Three Inside Up
- Candle 1: A large bearish candle continuing the downtrend — confident selling.
- Candle 2: A small bullish candle whose body fits entirely inside candle 1's body — a Bullish Harami. The bear trend has stalled.
- Candle 3: A bullish candle that closes above the high of candle 2 (some definitions require it to close above candle 1's open). The reversal is confirmed.
Three Inside Down
- Candle 1: A large bullish candle continuing the uptrend — confident buying.
- Candle 2: A small bearish candle whose body fits entirely inside candle 1's body — a Bearish Harami. The bull trend has stalled.
- Candle 3: A bearish candle that closes below the low of candle 2. The reversal is confirmed.
Why Three Inside Up Is More Reliable Than a Plain Harami
A Harami says: 'the trend might be pausing.' Three Inside Up says: 'the trend paused, and then buyers confirmed the new direction.' The third candle is the evidence. Without it, you are trading a hypothesis. With it, you are trading a confirmed event. The tradeoff is entry price — you enter at a higher level after the third candle, but with significantly more certainty.
Three Inside Up at a Support Zone
A stock falls to a weekly support zone. Day 1: large red candle, open ₹650, close ₹615. Day 2: small green candle inside Day 1's body, open ₹618, close ₹628. Day 3: bullish candle opens at ₹625, closes at ₹645 (above Day 2's high of ₹630). Three Inside Up confirmed. Entry: ₹645. Stop: below Day 1's low (₹612). Target: ₹680 (next resistance). Risk/reward ≈ 1:2.
Three Inside Up vs Morning Star: Which Is Better?
Both are three-candle reversal patterns. The Morning Star typically has a gap between candles and a smaller middle candle relative to the other two. Three Inside Up requires the Harami criterion (full body containment). In practice, either pattern at a significant support level with above-average volume is a high-quality setup. The Morning Star's gap requirement makes it slightly rarer and slightly more reliable on daily charts.
Key Takeaways
- Three Inside Up: large bearish candle → small bullish candle inside it (Harami) → bullish confirmation candle closing above the Harami.
- Three Inside Down: large bullish candle → small bearish candle inside it (Harami) → bearish confirmation candle closing below the Harami.
- The third candle is what separates this from a plain Harami — it confirms the directional shift.
- Three Inside Up/Down are essentially 'confirmed Harami' patterns and are significantly more reliable.
- The confirmation candle (third) must close above the high of the Harami candle (Up) or below the low (Down).