3 inside down candlestick pattern: The Best Exit Signal in the Market

downtrend signal

If you have visited my previous article on 3 inside up Candlestick chart patterns you would find some similarities here with opposite interpretations.

3 Inside down candlestick pattern is a 3 candlestick bearish chart patterns and one of the most commonly found and used strong signal pattern.

It can easily be identified and when efficiently used can help to find best possible time to make profit and exit from the market.

Yes, you got it right. It is a strong bearish trend reversal signal chart pattern and works well when found, after a proper uptrend where the market is searching for a resistance level.

Let’s dive into its usage, characteristics, behavior and how this can help you in trading

Physical appearance

It is important to get identify the correct form of 3 inside down candlestick pattern during chart analysis and understand its behavior in the market.

To start with it is formed in a combination of 3 candlesticks one bullish and the other two bearish, each having its own significance.

  1. The first candlestick is bullish which is usually long enough after an uptrend
  2. The second candlestick is bearish and the close price is below the mid price value of first bullish candlestick
  3. The third candlestick is the confirmation candles for the pattern which is bearish and has a close price value below the low of the first bullish candlestick.
3 inside down example__1_1
Source: Economic Times


Market Interpretations

Each candle has its interpretation which can easily be understood and identified.

The first candlestick of the pattern, you can see is long and bullish. This is usually after an uptrend so that is the continuation of the bullish market with buyers active and optimistic in the market. Sellers here are still pretty low and inactive

With the second bearish candlestick, you can interpret that sellers are not coming back in the game, with an optimistic behavior, closing the price below the mid price value of bullish candlestick. Here usually sellers find an opportunity to exit the market

The third candlestick confirms the pattern with a more bearish dominating feature closing below the low of the first bullish candlestick.

With this, it is assured that sellers are back in the game with full strength and buyers have lost their strength to drive the market further.

A new resistance level has formed and it is better to make exit from the market if you have sufficiently booked your profit margin.

Also, find other bearish trend reversal signals


Condition of use

This works best when found, after an uptrend. The bullish trend has when reaches its top and searching for resistance then if you find a 3 inside down candlestick chart pattern, it is a strong bearish reversal signal

It is advised in such case not to stay in the market as the further market is going to see the price fall. But then again this depends on your confirmation strategy. You can use RSI indicator for confirmation. 

You can find few case of strong bearish trend signals in below examples.

3 inside down example__2
Source: Economic Times


3 inside down example__3
Source: Economic Times

Key elements to remember

  1. 3 candlestick chart pattern
  2. Works well when found, after a strong  uptrend and consolidation
  3. Strong bearish signal, better to make secure exit from the market
  4. Wait for confirmation with your system to ensure your prediction.

Bottom Line

3 inside down candlestick pattern is something very commonly found and easily interpreted among the chart patterns in the market. It is very helpful to find bearish trend reversal with this pattern and make better exit timings. Be sure that you find this after a proper strong uptrend and get reconfirmed with technical indicators to ensure low risk.

It’s better to be safe and strong rather get high risk and prone to failure.

Post Author: Sushant Putatunda

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