Three line strike patterns are bullish. They are a four-candlestick pattern that takes place near support levels. The first three candlesticks on stock charts are bearish and are either red or black. The fourth is a bullish candlestick that closes above the third. Look for a possible upward continuation if the price rises above the fourth candle and remains above it.
What Is a Three Line Strike Pattern?
A three line strike pattern consists of four candlesticks that form near support levels. They start with three bearish candlesticks, and then the fourth bullish candlestick engulfs the three bearish ones. Typically, this causes a bullish reversal pattern.
The three line strike is rare and harder to find on the larger time frames. There are both bullish and bearish three line strike candlestick patterns.
Based on the name of this chart pattern, you could see it as a baseball game. You have two teams: the buyers and the sellers. Like in baseball, one side is out when you see those three strikes. Depending on who you’re rooting for, you could be frustrated or happy by the outcome.
There are two different three line strike candlestick patterns: bullish and bearish. These patterns are considered to be continuation patterns. While the bullish 3-line is a bullish continuation pattern, conversely, the bearish 3-line candlestick pattern is a bearish continuation pattern.
Basics
This pattern consists of four candles. Three of them are known as strikes. In other words, you have three candlesticks that stair step up or down, followed by a large bullish or bearish candlestick.
This is where it gets important not to get caught up in the exact name of the pattern. A couple of patterns could be formed while forming three-line strike candlestick patterns.
If it is bullish, it could form a case for a three-white soldier pattern. If bearish, it can be seen as a three black crows pattern. Once the fourth candle develops, it can be seen as an engulfing pattern.
While this is a continuation pattern, the bulls or bears come in to temper the move up or down. Make sure to confirm if the move will continue.
Three Line Strike Pattern Trading Strategy
- Watch for 1st three bearish candlesticks to form.
- Next, watch for 4th large bullish candlestick to engulf 1st three bearish ones.
- Then, watch for 5th candlestick to break above 4th bullish one.
- Traders take a long position once the price breaks above the 4th candlestick.
- Place the stop below the base of the 4th candle.
- Some traders take a short position once the price falls below 4th candle.
- Then, place the stop above the 4th candle.
Three Line Strike Pattern Example
This chart example shows a three line strike pattern on a daily chart. You’ll notice five bearish candlesticks in a row, followed by a large bullish candlestick that engulfed three of the candlesticks. Traders take an entry long when the price breaks above the third bearish candlestick. If the price fails to break out, you would place your stop loss below the third bearish candlestick.
Take note of the gap-up pattern that formed after the large bullish candlestick. This created a large uptrend afterward. Three line strikes don’t always create a large uptrend, but it can happen.
Bullish Three Line Strike Example
This is an example of a bullish three line strike of $AAPL on a daily chart. You’ll notice three bullish candlesticks formed near a previous peak level. Then, the bearish candlestick formed. This created a double top pattern. Traders take a short position when the price fails the third bullish candlestick. They put their stop loss at the top of the third candlestick. This example demonstrated a double top failure, followed by a period of consolidation and another breakout. Use proper risk management techniques when trading a three line strike pattern.
Frequently Asked Questions
The three line strike is a bullish reversal strategy. It starts with three bearish candlesticks followed by a bullish candlestick. Traders enter long when the price breaks above the third bearish candlestick.
The three line strike pattern has an accuracy rate of 64 percent. Although it has a positive average, it's essential to employ risk management when trading this pattern.
A bullish three line strike pattern occurs during an uptrend. It starts with three bullish candles and is then followed by a bearish candlestick. This is what causes the trend to reverse to the downside.
