Tres Adentro Abajo Complete Guide

What is Tres Adentro Abajo?

The Three Inside Down is a bearish reversal candlestick pattern consisting of three specific bars that signal the end of an uptrend and the beginning of a downward move. It is essentially a confirmed Bearish Harami. The formation begins with a long bullish candle (Day 1) that reflects the prevailing uptrend. On Day 2, a smaller bearish candle forms, with its real body completely contained within the real body of the first candle. This 'inside' bar indicates a sudden loss of momentum and indecision among buyers. The pattern is completed on Day 3 by a second bearish candle that closes below the close of the second day, providing the necessary confirmation that the bears have taken control. According to Thomas Bulkowski’s 'Encyclopedia of Candlestick Charts,' the Three Inside Down is a reliable reversal pattern, acting as a bearish reversal 65% of the time in a bull market. While it ranks 21st for overall performance, its frequency makes it a staple for technical analysts. Steve Nison highlights this pattern as a way to trade the Harami with greater certainty, as the third day acts as a filter against false signals. Volume characteristics often show a surge on the third day, reinforcing the validity of the breakout. Traders typically look for this pattern near key resistance levels or overbought conditions to maximize the probability of a successful trade.

Identification Rules

1. El mercado debe estar en una tendencia alcista establecida antes del patrón.
2. La primera vela debe ser una vela alcista (blanca o verde) larga.
3. La segunda vela debe ser una vela bajista (negra o roja) con su cuerpo contenido dentro del cuerpo de la primera vela.
4. La tercera vela debe ser una vela bajista que cierre por debajo del cierre de la segunda vela.

References

• Thomas N. Bulkowski (2005). Encyclopedia of Chart Patterns.
• Steve Nison (2001). Japanese Candlestick Charting Techniques.

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