The three-line strike is a four-candle pattern where three consecutive candles move in one direction, followed by a single large candle that engulfs all three. Despite appearing as a reversal, statistical analysis shows the bullish three-line strike actually has a high probability of continuing the prior uptrend, making it a continuation signal. The bearish variant behaves similarly as a continuation of the downtrend.
Three consecutive candles of the same colour establish directional momentum. The fourth candle opens in the direction of the trend but reverses to engulf all three prior candles. The bullish version statistically acts as a continuation pattern despite the bearish fourth candle. Volume analysis on the fourth candle helps distinguish continuation from genuine reversal. Context within the broader trend structure is essential for correct interpretation.
Enter in the original trend direction after the fourth candle's engulfing move completes. Wait for the next candle to confirm continuation of the prior trend. Look for the pattern within an established trend, not at extremes. Volume should decrease on the strike candle relative to the trending candles.
Stop beyond the extreme of the strike candle. Target the next measured move in the trend direction. Exit if the strike candle's level is decisively broken with follow-through. Partial profit at the prior swing high or low.
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The three-line strike is counterintuitive because the large engulfing candle looks like a reversal, but research across over fifty thousand occurrences shows it acts as continuation roughly eighty-three percent of the time in uptrends. Always consider the broader trend context and avoid trading the pattern in ranging markets where continuation statistics break down.
Doji and spinning top candles signal indecision between buyers and sellers. A doji has nearly identical open and close prices, while a spinning top has a small body with long wicks on both sides. These patterns are most significant at the end of extended trends where they can foreshadow reversals.
A harami (Japanese for 'pregnant') is a two-candle pattern where a small candle is completely contained within the prior candle's body. A bullish harami appears in downtrends; a bearish harami in uptrends. Haramis signal fading momentum but require confirmation before trading.
A bullish engulfing pattern occurs when a large green candle completely engulfs the prior red candle near the bottom of a trend. A bearish engulfing is the opposite — a large red candle swallows the prior green candle at the top. Engulfing patterns are among the most reliable two-candle reversal signals.
Pin bars are single-candle reversal patterns with a long tail (shadow) on one side and a small body on the opposite side. The tail shows a sharp rejection of a price level. Pin bars are the most widely used price action signal among naked chart traders and work on all markets and timeframes.