Three Inside Down

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Figure 1.

Figure 1. Three Inside Down pattern.

Forecast: bearish reversal
Trend prior to the pattern: uptrend
Opposite pattern: Three Inside Up
See also: Bearish Harami

Construction:

  • First candle
    • a candle in an uptrend
    • white body
  • Second candle
    • black body
    • the candle body is engulfed by the prior candle body
  • Third candle
    • the closing price is below the previous closing price

 

The Three Inside Down three-line pattern is introduced by Gregory Morris as an extension of the Bearish Harami pattern.

Its first line is any candle having a white body, appearing as a long line, that is White Candle, Long White Candle, White Marubozu, Opening White Marubozu or Closing White Marubozu. The second line is any black candle except the doji candles. Additionally the second line body needs to be engulfed by the first line body.

The opening price of the second line may be equal to the first candle's closing price. The closing price of the second line may be equal to the opening price of the first candle. These two situations cannot happen at the same time, however.

The third candle of the pattern may be formed by any candle having a black body except the doji candles, closing below the second candle's closing price.

The shadows do not matter in the case of this pattern.

The first line of the pattern may act as a support area.

The Three Inside Down pattern should be confirmed. Confirmation can be in the form of breaking the nearest support zone or a trendline.

 

Figure 2.

Figure 2. The Three Inside Down pattern, built of three lines, was introduced by Gregory Morris as a confirmation of the Bearish Harami pattern, constructed of 2 lines.
While discussing the Bearish Harami pattern, we paid attention to the fact that the first line is forming a support zone which needs to be broken.
A similar situation exists with the Three Inside Down -- if the third line closes below the first line, we can say that a pattern is confirmed. Such case is illustrated on the chart.
Within a downtrend prior a Bearish Harami pattern, two White Candles are formed. They are important because form a support zone. Also, it's worth to notice that these two candles appeared at a high trading volume.
For some traders, it's enough that a Bearish Harami appears, to open a position. However, that's not what we recommend.
The day following the Bearish Harami pattern opens slightly (by $0.01) above the prior closing price, but closes below the first line. Appearance of a Turn Down pattern confirms that the bears have control.

 

Figure 3.

Figure 3. Yet another example showing that the market needs to close below the first line of a Bearish Harami and Three Inside Down patterns in order to confirm the bearish signal.
On the chart, we can see an Opening White Marubozu (1), being the first line of the Bearish Harami and Three Inside Down. This candle forms a support zone, which as we can see worked well -- the market failed to move price below it. Appearance of the Opening White Marubozu (2) confirms the mentioned support area and the stock moved sideways.

 

Three Inside Down statistics

Below you can find some Three Inside Down pattern statistics calculated by CandleScanner software. To see more detailed statistics, for other markets and periodicity try our CandleScanner software. Prices start at only $10, and you can see more detailed statistics, for other markets and periodicity. Click here to find out more!

Pattern name: Three Inside Down
Scanner settings: daily stocks
Group: S&P500
Number of symbols: 502
Date range: 7/1/1995 - 6/30/2015
Time interval: daily candles
Total number of candlesticks: 2,236,421
Number of occurrences (Three Inside Down): 16,349
Number of occurrences (all candlestick patterns): 638,570
% of occurrences (Three Inside Down): 2.56 %
Average frequency: 136.8
Efficiency statistics (5 candlesticks testing period)

Efficiency NO DATA FALSE LOW MEDIUM HIGH
Number of
Occurrences
7 3,019 5,227 3,281 4,815
% of
Occurrences
0.04 % 18.43 % 31.97 % 20.07 % 29.49 %

 

Efficiency statistics (10 candlesticks testing period)

Efficiency NO DATA FALSE LOW MEDIUM HIGH
Number of
Occurrences
27 2,825 4,305 2,911 6,281
% of
Occurrences
0.17 % 17.11 % 26.33 % 17.81 % 38.58 %

 

10 Top best performing symbols

Occurrences Statistics 5 candlesticks testing period
(HIGH efficiency)
10 candlesticks testing period
(HIGH efficiency)
Symbol Number of
Occurrences
Average
Frequency
Number of
Occurrences
% of
Occurrences
Number of
Occurrences
% of
Occurrences
BSX 36 139.8 16 44.44 % 22 61.11 %
EL 38 129.9 17 44.74 % 23 60.52 %
RCL 36 139.8 17 47.23 % 21 58.33 %
AIG 38 132.5 18 47.37 % 21 57.90 %
ADI 38 132.5 22 57.90 % 22 57.90 %
ROP 46 109.4 20 43.47 % 26 56.52 %
FFIV 34 118.9 19 55.88 % 19 55.89 %
PLL 33 152.5 12 36.37 % 18 54.55 %
AA 35 143.8 15 42.86 % 19 54.28 %
BRCM 26 166.5 13 50.01 % 14 53.85 %

 

10 Top worst performing symbols

Occurrences Statistics 5 candlesticks testing period
(FALSE efficiency)
10 candlesticks testing period
(FALSE efficiency)
Symbol Number of
Occurrences
Average
Frequency
Number of
Occurrences
% of
Occurrences
Number of
Occurrences
% of
Occurrences
COL 28 125.7 12 42.86 % 12 42.86 %
NTAP 32 154.2 13 40.62 % 13 40.62 %
EBAY 33 127.8 13 39.39 % 13 39.39 %
JNPR 32 125.9 12 37.50 % 12 37.50 %
FISV 35 143.8 13 37.14 % 13 37.14 %
MU 38 132.5 14 36.84 % 14 36.84 %
A 28 140.3 12 42.86 % 10 35.71 %
GRMN 26 140.8 9 34.62 % 9 34.62 %
NVDA 30 137.9 10 33.33 % 10 33.33 %
REGN 36 139.8 12 33.33 % 12 33.33 %
Pattern name: Three Inside Down
Scanner settings: daily stocks
Group: S&P500
Number of symbols: 502
Date range: 7/1/2010 - 6/30/2015
Time interval: daily candles
Total number of candlesticks: 614,034
Number of occurrences (Three Inside Down): 3,730
Number of occurrences (all candlestick patterns): 166,328
% of occurrences (Three Inside Down): 2.24 %
Average frequency: 164.6
Efficiency statistics (5 candlesticks testing period)

Efficiency NO DATA FALSE LOW MEDIUM HIGH
Number of
Occurrences
7 536 1,492 851 844
% of
Occurrences
0.19 % 14.18 % 40.00 % 22.82 % 22.81 %

 

Efficiency statistics (10 candlesticks testing period)

Efficiency NO DATA FALSE LOW MEDIUM HIGH
Number of
Occurrences
27 480 1,216 764 1,243
% of
Occurrences
0.72 % 12.15 % 32.60 % 20.48 % 34.05 %

 

10 Top best performing symbols

Occurrences Statistics 5 candlesticks testing period
(HIGH efficiency)
10 candlesticks testing period
(HIGH efficiency)
Symbol Number of
Occurrences
Average
Frequency
Number of
Occurrences
% of
Occurrences
Number of
Occurrences
% of
Occurrences
MUR 8 157.3 4 50.00 % 6 75.00 %
CHK 7 179.7 4 57.14 % 5 71.43 %
HAS 7 179.7 2 28.57 % 5 71.43 %
AAPL 7 179.7 1 14.29 % 5 71.42 %
ETFC 7 179.7 5 71.42 % 5 71.42 %
RIG 7 179.7 5 71.42 % 5 71.42 %
GLW 9 139.8 3 33.34 % 6 66.67 %
ICE 9 139.8 4 44.45 % 6 66.67 %
TRIP 6 149.2 4 66.67 % 4 66.67 %
DISCA 6 209.7 4 66.66 % 4 66.66 %

 

10 Top worst performing symbols

Occurrences Statistics 5 candlesticks testing period
(FALSE efficiency)
10 candlesticks testing period
(FALSE efficiency)
Symbol Number of
Occurrences
Average
Frequency
Number of
Occurrences
% of
Occurrences
Number of
Occurrences
% of
Occurrences
SNDK 6 209.7 4 66.67 % 4 66.67 %
INTC 7 179.7 4 57.14 % 4 57.14 %
MU 7 179.7 4 57.14 % 4 57.14 %
REGN 9 139.7 5 55.56 % 5 55.56 %
CVC 13 96.8 7 53.85 % 7 53.85 %
A 10 125.8 7 70.00 % 5 50.00 %
COL 6 209.7 3 50.00 % 3 50.00 %
CVS 6 209.7 3 50.00 % 3 50.00 %
EIX 6 209.7 4 66.67 % 3 50.00 %
WMB 8 157.3 4 50.00 % 4 50.00 %

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