42Fibonacci
Home

Three Inside Up & Down

A harami, then a close above the first open

By
42Fibonacci
Updated
Read time
7–9 min

Three Inside Up is a Bullish Harami after a decline, followed by a third candle that closes above the first candle's open; Three Inside Down is the bearish mirror. The third close is the confirmation. Some traders wait for a stricter close above the first candle's high; pick one level and keep it.

At a glance
Type
Three-candle reversal
Variants
Up (after a decline) and Down (after a rally)
Story
Selling paused for a day, then buyers erased the selling day
Key rule
A Bullish Harami, then a third close above the first candle's open
Confirmation
Built in: the third close is the confirmation
Stop
Below the pattern's low, usually the first candle's (above its high for Down)

What Makes a Three Inside Up

A Three Inside Up is a Bullish Harami followed by a candle that closes higher and resolves it. It forms after a decline, and it takes three candles.

The name describes the first two. The second candle's body (the thick part between open and close) sits inside the first one's: a long red candle, often called the mother, and a small candle contained within it. The third candle closes above the mother's open and turns the pause into a move up.

The mirror, a Three Inside Down, is a Bearish Harami after a rally, followed by a candle that closes below the mother's open. This guide teaches the bullish form first and the bearish one as its mirror.

First candle (the mother)
A long red candle that continues the decline. Its body sets the box the next candle has to fit inside.
Second candle (the inside candle)
A small candle whose body sits within the mother's body. Only the bodies count; the shadows (the thin lines above and below) can poke out.
Third candle
Closes above the mother's open, taking back the whole red body. Usually green.
Note
Gregory Morris is credited with the pattern: a Harami with its confirmation attached. Until the third candle closes, the chart shows a Bullish Harami, not a Three Inside Up.

How a Three Inside Up Forms

Three sessions, three moods: sellers in control, sellers losing steam, and buyers taking the ground back.

Session one: a long down day

"Another heavy day. Sellers are firmly in charge."

A long red candle extends the decline. It looks like more of the same, and it sets the box the next candle will sit inside.

Session two: the selling stalls

"Quiet. Nobody pushed it lower today."

The next session trades inside the red body and barely moves. Sellers did not follow through. That pause is the Harami: a warning, not yet a turn.

Session three: buyers take it back

"Back above where the big red day started."

The third session closes above the mother's open. Everything the long red day gave up has been regained. The pause has been resolved upward.

How High Must the Third Candle Close?

The third candle has to close higher, but traders disagree on how much higher. Two levels are worth knowing, and both sit on the mother, the long red first candle:

  1. Above the mother's open (the standard)

    The close takes back the whole red body, so everything sellers did that day is undone. This is the usual definition.

  2. Above the mother's high (the strict version)

    The close also clears the mother's upper wick, the highest price of the selling day. Sometimes the third candle does this; sometimes it takes another day or two.

Three Inside Up: how high is high enough?Illustrative
Harami3rd4thInside candle's closeMother's openMother's high
After a decline, a long red candle (the mother) and a small green candle inside its body form a Bullish Harami. The third candle closes above the inside candle's close and above the mother's open: that close completes the Three Inside Up and confirms it. It does not close above the mother's high. The fourth candle does: that is the stricter level, the one the Harami guide's steps use and some traders wait for.

Which should you use? The strict level asks for more proof, but you buy later and higher with the same stop, so each share risks more. Neither is wrong. Pick one and use it on every trade.

Note
Some traders count any close above the small middle candle's close. That can happen while price is still inside the red body, so this guide doesn't use it.

Three Inside Up vs. Three Outside Up and the Morning Star

Two other three-candle bullish patterns also start with a red candle after a decline and end with a strong green one. They differ in the middle candle.

Three Inside Up
  • The second body sits inside the first: a pause
  • The third close is above the first candle's open
Three Outside Up
  • The second body wraps the first: a takeover
  • The third close is above the second close
Morning Star
  • The second candle is small and sits at or below the bottom of the first body
  • The third close is well into the first candle's body

Inside versus outside. In a Three Outside Up the second candle has already done the heavy lifting: its body wraps the red one and closes above its open. The third candle only has to add to that. In a Three Inside Up the second candle only paused, so the third candle does the work of taking the red body back.

Inside versus below. A Morning Star's middle candle sits at or below the bottom of the red body, often after a gap: one more push down that ran out of steam. A Three Inside Up's middle candle never leaves the red body. Both describe selling that stopped; the star shows it stopping lower.

Three Inside Up vs Three Inside Down

The two are mirrors: every rule flips.

Three Inside Up
  • After a decline: a Bullish Harami, then a close above the mother's open
  • Invalidated by a close below the pattern's low
Three Inside Down
  • After a rally: a Bearish Harami, then a close below the mother's open
  • Invalidated by a close above the pattern's high

The two levels flip too: a close below the mother's open (the standard), or below the mother's low (the strict version). The trade-off is the same: the strict level waits for more proof and enters further from the stop.

How to Trade a Three Inside Up

  1. Check there was a decline to reverse

    Look for a run of lower highs and lower lows into the pattern.

  2. Check the Harami

    The mother should be long, longer than the recent candles, and the second body should sit inside its body. A small mother makes a small box, and a close above its open proves little.

  3. Act on your chosen level

    Decide in advance which close you need: above the mother's open, or above its high. Enter only on that close.

  4. Put the stop below the pattern's low

    Usually the mother's low; if a later candle's shadow reaches lower, use that. A stop order triggers the moment price trades there, so leave a little room, then work out the share count from that distance.

Worked example

A stock has fallen for three weeks. A long red candle opens at $40.00, trades up to $40.50 early, and closes at $38.00, with a low of $37.80. The next candle is small, stays inside that body and keeps its low above $37.80. The third candle closes at $40.20, with a low well above $37.80: above the mother's open, but below its $40.50 high. Over the next four days price closes between $39.60 and $40.40, never trades below $39.40 and never closes above $40.50. Trader A uses the mother's-open level; Trader B uses the mother's high.

What did each trader's level do for them?

The approach

Trader A bought at $40.20 with a stop at $37.70, ten cents under the pattern's low, and holds a trade that is alive but has gone nowhere for four days. Trader B never bought: the selling day's best price was never cleared, and B's rule filtered out exactly this kind of stall. If price later closes above $40.50, B enters then, higher and with fewer shares for the same risk, while A holds the better price; if it falls to the stop, only A pays. Neither trader was wrong. Each followed a rule chosen in advance, and the rule decided which of these outcomes they were exposed to.

Reading Three Inside Up in Context

The pattern says selling paused and buyers answered. Context says whether that happened somewhere it matters.

Moving averages. A Three Inside Up that turns up from a rising 50-day moving average reads as the end of a pullback; under a falling one, it may be only a bounce inside a downtrend. Read the Candlesticks + Moving Averages guide →

Volume. Light volume on the inside candle fits a pause; heavier volume on the third candle means many shares changed hands as buyers took the body back. Read the Candlesticks + Volume guide →

The weekly chart. A daily Three Inside Up that forms while the weekly trend still points up is a dip in a larger advance; against a falling weekly trend, it has more to prove. Read the Candlesticks + Timeframes guide →

Common Three Inside Mistakes

MistakeInstead
Calling it before the third close

Harami after a decline, and the third day is up at midday. Three Inside Up.

The pattern exists at the close. A third candle that is above the mother's open at midday can still close below it.

Switching levels from trade to trade

This one looks strong, so the mother's open is enough today.

Pick one level and use it every time. Choosing after the fact turns the rule into a mood.

Counting a close above the inside candle's close

Up from yesterday, so it is confirmed.

That is the loosest level, and the close can still be inside the red body with the Harami unresolved. On the usual definition the third close has to clear the mother's open.

Finding it without a decline

Red, small, green in a flat stretch, so a reversal is coming.

A reversal needs something to reverse. In a sideways drift, the same three candles are just a few ordinary days.

Key takeaways
  • Three Inside Up is a Bullish Harami after a decline, then a third candle that closes above the mother's open; Three Inside Down is the bearish mirror
  • The third close is the confirmation, built into the pattern
  • Traders disagree on how high that close must be: above the mother's open (the standard) or above its high (the strict version). The strict one proves more and costs a later entry
  • Pick one level and use it every time. The stop goes below the pattern's low, usually the mother's

Frequently Asked Questions

What is the Three Inside Up candlestick pattern?

A three-candle bullish reversal. After a decline, a long red candle is followed by a small candle whose body sits inside it (a Bullish Harami), and then by a third candle that closes above the red candle's open. It shows selling paused and buyers took the ground back.

What is Three Inside Down?

The bearish mirror: after a rally, a long green candle is followed by a small candle inside its body (a Bearish Harami), then by a third candle that closes below the green candle's open.

How high does the third candle have to close?

Traders disagree. The standard is a close above the first candle's open, which takes back its whole body. The strict version waits for a close above the first candle's high, which can take another day or two. Pick one and use it every time.

Does Three Inside Up need confirmation?

No. The third candle's close is the confirmation, built into the pattern. A trader who wants more can wait for a close above the first candle's high, at the cost of a later entry.

Is Three Inside Up reliable?

No pattern is reliable on its own. Three Inside Up is more than a plain Harami because its third candle confirms the turn, but the trade can still fail: a close below the pattern's low undoes it. How tall the first candle is still matters, and so do the 50-day moving average and the weekly trend it forms against.

Where does the stop loss go?

Below the pattern's low, usually the first candle's low, with a little room. The stop does not move with the level you choose, so a stricter level means a later entry and more risk per share.

What is the difference between Three Inside Up and Three Outside Up?

The second candle. In Three Inside Up its body sits inside the first candle's body: a pause. In Three Outside Up its body wraps the first candle's body: a takeover. Both finish with a higher close.

What is the difference between Three Inside Up and a Morning Star?

The middle candle. In a Morning Star it sits at or below the bottom of the first candle's body, often after a gap. In Three Inside Up it stays inside the first candle's body.

Who created the Three Inside Up pattern?

Gregory Morris, author of Candlestick Charting Explained, is credited with it: he built it as a Harami with its confirming candle attached.

The Bottom Line

A Three Inside Up is a Harami that finished its sentence. The pause said selling was tiring; the third close says buyers took the ground back.

How much ground you demand is your choice. The mother's open says the selling day was erased; the mother's high says its best price was cleared too. Choose the level once, keep it from trade to trade, and check that the pattern formed somewhere that matters.

On this page