Bullish Three Line Strike Candlestick Pattern: In the evolving world of trading, mastering effective strategies is crucial for success. One such strategy that has gained popularity for its simplicity and potential profitability is the bullish three-line strike candlestick pattern.
In this article, we shall understand the Bullish Three Line Strike candlestick pattern formation, trading strategy and its components for a better straightforward approach.
Bullish Three Line Strike Candlestick Pattern – Definition
Bullish Three Line Strike is a multiple candlestick pattern that signifies the continuation of price towards the uptrend in security. It consists of three consecutive bullish candles, followed by a red candle. The pattern formation represents a short pullback in the existing trend signalling a potential emergence of the uptrend continuation.
Bullish Three Line Strike Candlestick Pattern – Identification
As the Bullish Three Line Strike Candlestick pattern suggests a bullish Continuation, it is preferable for this pattern to appear in the middle of an uptrend. Now, let us understand the formation of each candle in this pattern:
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- The First three candles are bullish, where every candle closes higher than the prior candle.
- A large red candle that opens higher than the prior candle’s close and closes below the first candle’s low of the pattern.
Bullish Three Line Strike Candlestick Pattern – Psychology
The three consecutive bullish candles indicate strong buying pressure, while the fourth bearish candle suggests a retest of the previous lows. This reflects a temporary pullback in the market due to profit-taking, but the underlying trend considered to be in intact.
This pattern is confirmed when the price breaks above the high of the fourth bearish candle, indicating the bulls are still in control. The psychology behind this pattern is rooted in the idea that the market is experiencing a temporary slowdown, but the underlying trend remains strong, making it a reliable signal for traders to enter long positions.
Bullish Three Line Strike Candlestick Pattern – Trading Ideas
In a strong prevailing uptrend, the formation of the bullish Three Line Strike pattern indicates the continuation of the bullish trend. It signals an entry to the long position to ride the uptrend.
Entry:- Enter a long position in a security at or above the high or close price of the fourth(red) candle of the pattern formed.
Stop loss:- The low price of the pattern formed can be set as a stop loss for the good risk-reward ratio.
Profit Target:- As the pattern doesn’t define any profit targets, it can be set based on the risk-reward ratio or the next resistance levels associated with the chart.
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Bullish Three Line Strike Candlestick Pattern – Example
In the above chart of State Bank of India, we can observe the formation of the Bullish Three Line Strike candlestick pattern. As discussed in this article, the price saw a continuation in trend after the formation of the pattern.
At the time of the formation of this pattern, a trader could have taken a long position when the price of the stock started trading above Rs. 277.15 and the stop loss was at Rs. 248.60.
Bullish Three Line Strike Candlestick Pattern – Limitations
While the Bullish Three Line Strike is a powerful continuation signal, traders should be aware of its limitations while spotting trading opportunities.
As the fourth red candle in the pattern entirely engulfs the prior three candles, it can also suggest the bulls have been overtaken by the bears. Thus, it is important to interpret overall market conditions and also use other technical indicators to confirm that the overall bullish trend is still intact.
Conclusion
The bullish three-line strike is a strong tool for traders to identify potential bullish reversals in the security. Understanding its formation, strategies and limitations, helps traders to make informed trading decisions.
As a trader, it is always preferred to use the pattern in conjunction with other technical tools to avoid false signals. Also, proper risk management with good risk-reward ratios and backtesting makes a trader profitable in the long run.
Written by Deepak
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