In an uptrend, the 1-2-3 pattern forms as a structured pause that signals a potential continuation or early warning of weakness, depending on confirmation. The pattern begins after a clear bullish move with higher highs and higher lows already established.

Point 1 is created when the price makes a swing high and then pulls back. This pullback is normal and reflects profit-taking, not a trend change. Point 2 forms when the price rallies again and creates a higher high above point 1, confirming that buyers are still in control. This is a key step because it keeps the uptrend intact.

Point 3 appears when the price pulls back once more but fails to fall below point 1. Instead, it forms a higher low. This higher low shows that selling pressure is weakening and buyers are stepping in earlier than before. The structure now reflects strength within the trend.

The pattern is confirmed when the price breaks above point 2. This breakout suggests renewed momentum and provides a logical entry point for trend traders. Stops are commonly placed below point 3 to manage risk. In an uptrend, the 1-2-3 pattern helps traders align with momentum while entering on structure rather than emotion.