Three Line Strike
The Three Line Strike is a four-candle candlestick continuation pattern where three consecutive candles in the direction of the prevailing trend are followed by a single large candle in the opposite direction that completely engulfs all three prior candles, historically associated with temporary counter-trend pullbacks before trend resumption.
The Three Line Strike is one of the more counterintuitive candlestick patterns. It looks visually like a reversal — three trending candles are suddenly engulfed by a large opposing candle — but historically it has been classified as a continuation pattern rather than a reversal. The logic is that the large opposing candle represents an aggressive but temporary flush against the prevailing trend, after which the original trend historically resumed.
The Bullish Three Line Strike appears in an uptrend. Three consecutive bullish candles with consecutively higher closes are followed by a single large bearish candle that opens above the third candle's close and closes below the first candle's open, engulfing all three prior candles. Historically, this oversized red candle has represented forced liquidation or profit-taking by short-term traders, with the underlying uptrend remaining intact.
The Bearish Three Line Strike appears in a downtrend. Three consecutive bearish candles with consecutively lower closes are followed by a single large bullish candle that engulfs all three. This has historically been observed as a sharp short-covering rally in a declining stock, after which the downtrend typically resumed over subsequent sessions.
In Indian markets, the Bearish Three Line Strike has historically been observed in structurally weak mid-cap and small-cap stocks during bear phases. A sharp one-day rally — sometimes 5-10% — in a consistently declining stock can attract fresh buyers, but if the pattern context is a downtrend and the Four Line Strike conditions are met, historical precedent suggests the trend often reasserted itself within days.
The pattern has been studied extensively in algorithmic trading backtests. Some quantitative studies on NSE-listed stocks have found that the Three Line Strike, when occurring within the context of a strong directional trend confirmed by a 200-day moving average, has a higher historical continuation rate than when it appears in choppy or range-bound markets.
Volume is a useful confirmatory tool. A Bullish Three Line Strike where the large bearish fourth candle has below-average volume has historically been more reliably followed by trend continuation than when the fourth candle carries high volume, which may indicate more genuine selling pressure entering the market.