Bearish Three-Line Strike Candlestick: Important Results
Theoretical performance: Bearish continuation. Tested performance: Bullish reversal 84% of the time Frequency rank: 94 Overall performance rank: 1 Best percentage meeting price target: 80% (bull market, down breakout) Best average move in 10 days: -8.81% (bull market, down breakout) Best 10-day performance rank: 1 (bull market, down breakout) All ranks are out of 103 candlestick patterns with the top performer ranking 1. “Best” means the highest rated of the four combinations of bull/bear market, up/down breakouts. The above numbers are based on hundreds of perfect trades. See the glossary for definitions. |  Bearish Three-Line Strike |
Bearish Three-Line Strike Candlestick: Discussion
My testing of the bearish three-line strike candlestick pattern shows that it acts as a bullish reversal 84% of the time instead of the bearish continuation that candle theory suggests. Unfortunately, with a frequency rank of 94, it will be difficult to find. The overall performance rank is 1, the best out of 103 candle patterns. The 8.81% average drop in a bull market is well above the 6% that I consider good. That performance also ranks first, but price only meets the target 80% of the time. The price target is the height of the candle projected upward or downward from the top or bottom of the candle pattern, respectively. Tall candle patterns have a more difficult time meeting targets than do short patterns.
One explanation of why this candle acts as a bullish reversal is that the closing price in the pattern is near the candle’s top. An upward breakout occurs when price closes above the top of the candle, so it may only take a few days for that to happen. A downward breakout, since price has to drop farther, may be more difficult to achieve.
Bearish Three-Line Strike Candlestick: Identification Guidelines
| Characteristic | Discussion |
| Number of candle lines | Four. |
| Price trend leading to the pattern | Downward. |
| Configuration | Look for three black candles forming lower lows followed by a tall white candle that opens below the prior close and closes above the first day’s open. In other words, the last candle spans most of the price action of the prior three days. |
Bearish Three-Line Strike Candlestick: Three Trading Tidbits
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.
- Bearish three-line strike candles that appear within a third of the yearly low perform best — page 759.
- Trade bearish three-line strike candles that appear in a downward retracement of an upward price trend — page 761.
- Bearish three line strike candles act as reversals most often within a third of the yearly high — page 761.
Bearish Three-Line Strike Candlestick: Example
The bearish three-line strike candle pattern appears in the red circle on the daily scale. Price forms three black candles, each with lower closes, in a downward price trend. A tall white candle engulfs the price action of the prior three days. The candle acts as a bullish reversal when price breaks out upward, and closes above the top of the candle pattern.
