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.
4H, Daily
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.
The hammer and hanging man are single-candle patterns with small real bodies and long lower shadows (at least 2× the body). A hammer appears at the bottom of a downtrend (bullish), while a hanging man appears at the top of an uptrend (bearish). The long wick indicates that sellers pushed price down but buyers recaptured ground.
Tweezers are two-candle patterns where both candles test the same high (tweezer top) or low (tweezer bottom). The first candle extends the trend and the second candle reverses. The matching highs/lows create a visual 'tweezers' shape indicating a rejection level.
The abandoned baby is a rare three-candle reversal pattern considered one of the most reliable candlestick signals. It forms when a doji gaps away from the preceding candle and the following candle gaps in the opposite direction, leaving the doji isolated with gaps on both sides. The pattern indicates a dramatic shift in market sentiment where momentum completely reverses between sessions.