GameStop, Crocs, Marathon Digital Stocks Form Continuation Pattern: How To Play It

Crocs, Inc CROX, GameStop Corporation GME and Marathon Digital Holdings, Inc MARA have developed inside bar patterns on the daily chart. An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current 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 subdequent 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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Crocs has a large mother candle which was created on Tuesday followed by a small inside bar on Wednesday. The stock is trading in a strong uptrend and the inside bar is bullish.

GameStop created a mother candlestick on Monday with an inside bar created on Tuesday and Wednesday, which makes it a double inside bar pattern. The stock is trading in an uptrend and the inside bar is bullish.

Marathon Digital formed an inside bar on Wednesday after printing the mother candle on Tuesday. The stock is trading in a downtrend and the inside bar is bearish.