Three Inside Down
The Three Inside Down is a three-candle bearish reversal pattern — the mirror of Three Inside Up. The first two candles form a Bearish Harami (a large bullish candle followed by a small bearish candle whose body fits entirely inside the first candle's body), and the third candle is a bearish confirmation that closes below the first candle's open (below the bottom of the bullish candle's body). The third candle provides the confirmation the Harami alone lacks.
Three Inside Down candlestick pattern diagram
Pattern Anatomy
- Candles 1-2 form a Bearish Harami: a large bullish candle followed by a small bearish candle whose body is entirely inside the first candle's body
- Candle 3 must be bearish (Close < Open)
- Candle 3 must close below Candle 1's Open — the bottom of the first candle's bullish body
- Per Nison and Bulkowski, the correct threshold is the bottom of candle 1's bullish body — not the top
- Confirms that sellers have recaptured the entire territory that buyers controlled
How to Interpret
- More reliable than a standalone Bearish Harami — the third candle adds confirmation
- Most significant after a sustained uptrend — signals potential bearish reversal
- The story: buying pressure (candle 1), indecision (candle 2), selling takeover (candle 3)
- Volume on candle 3 adds conviction — heavy selling volume strengthens the signal
- Best when appearing at a known resistance level
How Engulfy Detects the Three Inside Down
- Candles 1 and 2 must form a valid Bearish Harami
- This means: c1 bullish, c2 bearish, c2’s body entirely within c1’s body
- Candle 3 must be bearish (Close < Open)
- Candle 3 must close below Candle 1’s Open (the bottom of the first candle’s bullish body)
- This confirms the reversal — sellers broke through the prior buying range completely
The confirmation checks that candle 3 closes below the bottom of candle 1's bullish body — closing below the entire prior buying range is the meaningful threshold.
Expert References
- Steve Nison, Japanese Candlestick Charting Techniques — describes Three Inside Down as a confirmed Bearish Harami, providing stronger reversal evidence than the Harami alone
- Thomas Bulkowski, Encyclopedia of Candlestick Charts — found standalone Bearish Harami patterns are relatively unreliable at approximately 56%, while Three Inside Down reverses bearishly about 64% of the time
Controversy & Limitations
- Slower to form — requires three candles, so the signal arrives later than single-candle patterns
- By the time candle 3 closes, part of the downward move may already be priced in
- Some analysts prefer using the Bearish Harami as an early alert and candle 3 as the entry trigger, rather than naming it a separate pattern