Three Line Strike: The Hidden Gem of Candlesticks

The Three Line Strike is a rare and highly effective 4-candle continuation pattern. While it looks like a reversal to the untrained eye, it is actually a 'Liquidity Grab' that traps weak-handed traders who try to enter on a major counter-trend spike. In a bullish market, it consists of three small bullish candles followed by one massive bearish 'Strike' candle.

This massive strike candle 'Swallows' the entire previous three bars, but here is the trick: The trend does not reverse. Instead, the institutions use the strike to 'Clear out the stop-losses' of people who were already long, allowing them to buy at a much better price before the trend continues up.

To be a valid Bullish Three Line Strike: 1. The Three White Soldiers: Three small, consecutive bullish candles that make higher highs and higher lows. 2. The Strike Candle: A massive bearish candle that opens higher and closes BELOW the open of the first candle.

This fourth candle is the 'Strike'. It is a high-momentum move that appears to be a total structural capitulation. In reality, it is a Bear Trap. The bearish candle exhausts the remaining supply, and the price immediately rotates back to the upside in the next few bars.

The Signal Entry: The entry occurs on the close of the massive fourth candle, or better yet, as a Buy Limit at the 50% midpoint of the strike candle. Because this pattern is a continuation signal, you are entering the original trend on a massive discount. Probability: The Three Line Strike is statistically one of the highest-win-rate continuation signals (Bulkowski's research suggests up to 84% in some markets). It works because it 'Cleans the slate'—after the strike candle, there are no more sellers left to stop the original impulsive move.

To ensure success, never trade a Three Line Strike in a sideways or 'Choppy' market. It MUST occur during an established uptrend on the H1, H4, or Daily charts. If you see a Three Line Strike occurring at a major structural pivot point, it is a high-confidence signal to join the move.