Understanding Bullish Three-Stick Trend Reversal Patterns

The three-stick patterns in this section offer you a heads-up when a downtrend is about to switch gears and turn into an uptrend. Many of these three-stick patterns exist, and in the pages that follow I cover many of the most common ones. With three days needed to complete each pattern, you have time to watch as the patterns shape up, and you should be focused in when the third day rolls around, and you’ve noticed some interesting developments during the two preceding days.

When working with three-day patterns, be prepared by closely monitoring days that follow two days of promising price action. If a pattern is completed as you’d hoped, you need to be ready to put on the appropriate trade and stop order near the close of the day on which the pattern is completed.

The three inside up pattern

The three inside up pattern is a good place to begin my discussion of the bullish three-stick patterns that can let you know when a downtrend is about to be reversed. This pattern is a straightforward pattern that you can recognize with just a little practice.

Identifying the three inside up pattern

The three inside up pattern has a peculiar name, but a quick look at Figure 9-1 should give you a good idea of where the name originated. The three part comes from there being three days involved in creating the pattern. There are ...

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