What To Watch When Amazon, Advanced Micro Devices, General Motors Break From This Pattern

Amazon, Inc AMZN, Advanced Micro Devices, Inc AMD and General Motors Company GM were all settling into inside bar patterns on Thursday on lower-than-average volume.

An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the trend.

An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."

A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.

• Bullish traders will want to search for inside bar patterns on stocks that are in an uptrend. Some traders may take a position during the inside bar prior to the break while other aggressive traders will take a position after the break of the pattern.
• For bearish traders, finding an inside bar pattern on a stock that's in a downtrend will be key. Like bullish traders, bears have two options of where to take a position to play the break of the pattern. For bearish traders, the pattern is invalidated if the stock rises above the highest range of the mother candle.

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The Amazon Chart: Amazon’s inside bar pattern is neutral because the stock is also trading in a symmetrical triangle pattern on the daily chart. Amazon is set to meet the apex of the triangle on July 19, and if the stock doesn’t break up or down from Wednesday’s mother bar later on Thursday, a double inside bar may form on Friday.