The three inside up pattern is a bullish reversal pattern composed of a large down candle, a smaller up candle contained within the prior candle, and then another up candle that closes above the close of the second candle.
These patterns are short-term in nature, and may not always result in a significant or even minor trend change.
Consider using these patterns within the context of an overall trend. For example, use the three inside up during a pullback in an overall uptrend.
REASON -
The downtrend continues on the first candle with a large sell-off posting new lows. This discourages buyers, while sellers grow confident.
The second candle opens within the prior candle's trading range. Rather than following through to the downside, it closes higher than the prior close and the current open. This price action raises a red flag, which some short-term short sellers may use an opportunity to exit.
The third candle completes a bullish reversal, trapping remaining short-sellers and attracting those who are interested in establishing a long position.
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