An inside bar is considered to have a bullish implication if it occurs at the end of a price decline — a pullback in an uptrend or a swing down in a ranging market.
Both candlesticks in the pattern can have any color, but a bearish/bullish or bearish/doji combination is logically more in tune with what the pattern stands for — an accumulation and a potential bullish reversal.
The inside bar pattern is considered to have a bearish significance if it occurs at the end of a price swing up — a pullback in a downtrend or an upswing in a ranging market.
While both candlesticks in this situation can have any color, a bullish/bearish combination or bullish/doji combination is considered more in keeping with what the pattern indicates — a bearish accumulation and potential downward reversal.
in an uptrend, look for the inside bar pattern at the end of a pullback at a known support level so that you can ride the impulse wave in the direction of the trend. This way, you are making high probability trades.
Looking for this price action signal around a resistance level and trying to trade against the trend direction could be disastrous.
In the AUD USD chart below, the price is trending up and broke the resistance level, which later became a support level.
The next pullback ended there with the formation of an inside bar, and the price started climbing again.
In a downtrend, look for the inside bar pattern at the end of a rally to a known resistance level so that you can ride the impulse wave down when the price resumes the decline.
In the AUD USD chart below, the price is in a downtrend. It broke below a support level, which turned to a resistance level. When the price pulled back to the resistance level, it formed an inside bar pattern twice and dropped again.