In-Neck Pattern candlestick pattern

The In-Neck pattern is a bearish continuation pattern that consists of two candlesticks. This pattern shows that the buyers' attempt to push the price higher in the second candlestick is not enough to reverse the downward trend.

The first candlestick appears bearish as a continuation of the downtrend and indicates strong selling pressure in the market. The sellers are in control and the price closes near the bottom of the candlestick. Since the second candlestick is bullish, but gaps down and closes slightly above the first candlestick, it indicates that the current trend is likely to continue.

The In-Neck pattern is similar to the On-Neck pattern. In the On-Neck pattern, the second candlestick closes at or very close the lowest price (bottom shadow) of the first red candlestick, but, in the In-Neck pattern, the closing price is slightly above or at about closing price of the 1st candlestick (where the red body ends).

Both patterns are formed in a downtrend and represent a brief pause before the downtrend movement resumes.

This pattern can also be confused with the Piercing Line. The Piercing Line is a bullish reversal pattern that occurs after a downtrend, while the In-Neck pattern is a bearish continuation that occurs during a downtrend. Another key difference is the 2nd candlestick: in the Piercing Line, the 2nd candlestick closes more than halfway into the real body of the first candlestick. That shows that buyers might finally gain control over the market and push prices higher.

Construction

1st

• continuation of established downtrend
• long red body

2nd

• green body smaller than red bode of 1st candlestick
• with very short to no bottom shadow at all
• opening price is below 1st candlestick closing price^①
• closing price is slightly above or at about 1st candlestick closing price^②

Traders often look for confirmation signals, such as increased volume or additional technical indicators, to validate the potential continuation of the bearish trend. The next bearish candlestick can serve as the confirmation as well.

Stop loss can be placed just above the highest price of the pattern (or the 1st candlestick up shadow).