As of 12/20/2024
Indus: 42,840 +498.02 +1.2%
Trans: 15,892 +32.54 +0.2%
Utils: 986 +14.76 +1.5%
Nasdaq: 19,573 +199.83 +1.0%
S&P 500: 5,931 +63.77 +1.1%
|
YTD
+13.7%
0.0%
+11.9%
+30.4%
+24.3%
|
 44,200 or 41,750 by 01/01/2025 16,100 or 17,700 by 01/01/20251,050 or 975 by 01/01/202520,500 or 19,300 by 01/01/20256,100 or 5,775 by 01/01/2025 |
As of 12/20/2024
Indus: 42,840 +498.02 +1.2%
Trans: 15,892 +32.54 +0.2%
Utils: 986 +14.76 +1.5%
Nasdaq: 19,573 +199.83 +1.0%
S&P 500: 5,931 +63.77 +1.1%
|
YTD
+13.7%
0.0%
+11.9%
+30.4%
+24.3%
| |
|
44,200 or 41,750 by 01/01/202516,100 or 17,700 by 01/01/20251,050 or 975 by 01/01/202520,500 or 19,300 by 01/01/20256,100 or 5,775 by 01/01/2025 | ||
The three inside down candlestick acts as a reversal, but not as frequently as I would like. A check of the numbers shows that reversals occur most often within a third of the yearly low, regardless of market conditions (bull or bear).
The frequency rank is 33rd out of 103 candlestick patterns, so this is an easy one to spot in a crowd. The overall performance after 10 days is just mid range. You will want to avoid trading this candle after a downward breakout in a bull market. That combination gives the worst performance after 10 days. If you ignore the 10 day restriction, then avoid the three inside down pattern in a bull market. This candle does best in a bear market.
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Encyclopedia of Candlestick Charts
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Theoretical performance: Bearish reversal
Tested performance: Bearish reversal 60% of the time
Frequency rank: 33
Overall performance rank: 56
Best percentage meeting price target: 58% (bull market, up breakout)
Best average move in 10 days: 4.93% (bear market, up breakout)
Best 10-day performance rank: 30 (bear market, down breakout)
All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts. The above numbers are based on hundreds of perfect trades. See the glossary for definitions. |
 Three Inside Down
|
The three inside down candlestick is supposed to act as a bearish reversal in theory and testing shows that it does but only 60% of the time. If 50% represents random behavior then a 60% reversal rate does not inspire confidence. The overall performance rank is 56 and that is just mid list, too. It suggests that the post breakout trend is not awe-inspiring.
The best percentage move 10 days after the breakout is a rise of 4.93% after an upward breakout. That ranks 30th. I consider moves of 6% or higher as good ones, so this is well behind the pack.
| Characteristic | Discussion |
| Number of candle lines | Three. |
| Price trend leading to the pattern | Upward. |
| Configuration | Look for a tall white candle in an upward price trend. Following that, a small black candle appears with the open and close within the body of the first day. The tops or bottoms of the two bodies can be the same price, but not both. The last day must close lower, but can be any color. |
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.
The three inside down candlestick is a bearish harami with a confirming candle as the third day, according to Morris who created this candle pattern. The chart shows an example of the three inside down circled in red. An upward price trend leads to a tall white candle. Following that, a smaller black candle appears that fits inside the body of the white candle. The last day has a lower close, but the candle can be any color. The lower close confirms the reversal (downward move).
This example of the three inside down pattern functions as a bullish reversal. Why? Because price trends upward into the candle and breaks out downward. A downward breakout happens when price closes below the bottom of the candlestick pattern.
The best way to trade the three inside down is to find it in an upward retrace of the downward price trend. By that I mean the longer term trend should be moving lower and then price retraces a portion of the down move. At the top of the upward retrace, the three inside down appears and it signals the end of the uptrend. When the downward breakout occurs, price rejoins the downward trend already established.
-- Thomas Bulkowski
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