The In Neck candlestick pattern is a special formation that happens on a price chart, usually when the market is going down. Imagine you’re on a slide that keeps going down, and suddenly, the slide flattens out for a moment before continuing down again. That’s kind of what the In-Neck pattern looks like.

This pattern is made up of two candles (or bars) on a chart. The first candle is big and red, showing that the price is going down a lot. The second candle is smaller and green, showing that the price tried to go up a bit but didn’t quite make it. Even though it shows a bit of a fight from buyers, it usually means that the market might keep going down.

How to Spot the In-Neck Pattern

Finding the In Neck pattern is like solving a little puzzle. Here’s how you can spot it:

1. Look for a Downtrend: First, make sure the market is already moving downward. This pattern shows up when prices are falling.
2. Find the First Candle: Look for a big red candle that shows strong selling pressure. This candle is the first part of the pattern.
3. Find the Second Candle: Next, find a smaller green candle. The important thing about this candle is that it closes near the end of the red candle but doesn’t go lower. This shows that the buyers tried to push the price up but didn’t succeed.
4. Check the Pattern: Make sure the green candle doesn’t close higher than the low of the red candle. If it doesn’t, then you’ve found the In Neck pattern.

Why It Matters

The In Neck pattern is like a warning sign. Even though the buyers (represented by the green candle) tried to push the price up, they weren’t strong enough to change the direction. This usually means the market will continue going down, so traders often use this pattern to prepare for more price drops.

Trading with the In Neck Pattern

If you’re trading and you spot the In Neck pattern, you can use it as part of your strategy. Here are a few tips:

1. Bearish Continuation: Since this pattern usually means the market will keep going down, traders might decide to sell (or “short”) after spotting it, expecting prices to drop further.
2. Manage Your Risk: Trading always comes with risks, so it’s important to protect yourself. You can do this by setting a stop-loss order. This means if the price goes the other way (up), you won’t lose too much.
3. Use Other Indicators: To be extra sure, you can combine the In Neck pattern with other tools, like moving averages or the Relative Strength Index (RSI). These tools help confirm if the market is going down.