What Is 'In-Neck Pattern'

The in-neck pattern is a two-candle bearish continuation pattern that appears on candlestick charts.

Breaking Down 'In-Neck Pattern'

The in-neck pattern is a continuation pattern with the following characteristics:

  • The market is in a downtrend.
  • The first candle is black with a long real body.
  • The second candle is white with a close near the first candle’s close and an open that's below the first candle’s low. This candle’s real body and shadows can take a variety of different forms, ranging from a hammer to a doji.

This chart pattern shows bulls attempting a rally that loses momentum and fails to reverse the trend. After failing to break out from the first candle’s lows, bears regain control over the market and send prices lower.

The in-neck­ pattern is very similar to the on-neck pattern, where the second candle closes below the first candle’s close. The on-neck pattern is often more reliable than the in-neck pattern but both are accurate to a coin flip. The morning star pattern is a similar candlestick pattern that has much better accuracy in day to day price action.

Traders should use the in-neck pattern along with other forms of technical analysis, such as chart patterns or technical indicators, to maximize their odds of success.

In-Neck Trader Psychology

The security is engaged in an active downtrend. Bears are confident that lower prices will follow while bulls are on the defensive. The first candle opens lower and fails to reverse due to an inadequate supply of buying pressure. Bears pile on and the security ticks lower during the session, with active selling pressure and the forces of gravity controlling weak price action. The candle ends the market day near the intraday low, grinding out a small shadow that indicates a minor bounce rather than buying commitment. Bears are now over-confident while bulls grow more despondent and emotional.

The bulls' caution is justified on the second candle, which opens with a down gap that indicates emotional and one-sided selling pressure. However, the swift decline to a lower level exhausts the available supply of selling pressure, allowing bulls to buy the dip during the session. Their buying power fails to lift the security above the low of the first candle, denying a technical reversal signal. This price action indicates limited buying interest that allows bears to resume control of the ticker tape on the third or fourth candle. dropping the security to a new low. 

RELATED TERMS
  1. Thrusting Pattern

    Thrusting pattern is a 2-bar candlestick pattern that signals ...
  2. Three Outside Up/Down

    The three outside up and three outside down are three-candle ...
  3. Advance Block

    The advance block is a three-candle bearish reversal pattern ...
  4. Three Stars in the South

    The three stars in the south is a three-candle bullish reversal ...
  5. Counterattack Lines

    The counterattack lines pattern is a two-candle reversal pattern ...
  6. Morning Star

    A morning star is a bullish candlestick pattern in a stock's ...
Related Articles
  1. Trading

    Two Candlestick Patterns Predicting A Bottom

    This article tries to find some bottoms in four stocks using two different candlestick patterns.
  2. Trading

    Tweezers Provide Precision for Trend Traders

    How to use candlestick tweezer patterns for analyzing and trading financial markets.
  3. Trading

    Technical Analysis: Triple Tops and Bottoms

    Triple and double tops and bottoms may be tough to spot but can be powerful patterns.
  4. Investing

    EUR/USD Catches a Bid From Major Support

    EUR/USD was under pressure in European trading but caught a bid after testing support from a horizontal level that has been in play since late May.
  5. Trading

    Heikin-Ashi: A Better Candlestick

    The Heikin-Ashi technique modifies the open-high-low-close series that most candlestick charts use, thus making trends easier to spot.
  6. Trading

    Introduction to Technical Analysis Price Patterns

    How to recognize price patterns that are key to technical analysis.
  7. Trading

    Watch For These Chart Pattern Breakouts Right Now

    These stocks are near chart pattern breakout points, indicating potential trend reversals ahead.
  8. Trading

    Bullish Engulfing Candle In An Uptrend

    These four stocks are in uptrends that recently had a bullish engulfing candlestick pattern.
  9. Trading

    Identifying First Rise Patterns and What to Do With Them

    The first rise pattern marks the initial 100% retracement of a downtrend within the time frame of interest.
  10. Trading

    Stock Chart Patterns to Keep an Eye On

    Some of these stocks are exhibiting big chart patterns, so a breakout is likely to be significant.
RELATED FAQS
  1. What does the three black crows pattern mean?

    Learn the basics of the three black crows pattern and how analysts and traders interpret this bearish reversal pattern when ... Read Answer >>
  2. What are the main differences between a Doji and a Spinning Top pattern?

    Identify the differences between doji candles and spinning tops on a candlestick chart, and learn how traders look at each ... Read Answer >>
  3. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ... Read Answer >>
  4. What Do You Call a Candlestick With No Shadows?

    A candlestick with no shadow is seen as a strong signal of conviction by either buyers or sellers. Read Answer >>
  5. What do the different colored candlesticks mean?

    A typical candlestick chart is composed of a series of bars, known as candles, which vary in height and color. Read Answer >>
Trading Center