Bullish 3 Line Strike Pattern

• It is a four candlestick pattern observed during a bullish rally.
• This pattern generally indicates a trend reversal, however, there is a chance of trend continual based on the fifth candle formed.

Traders Psychology:

• As there is a bullish rally in the market, the first candle formed is a green candle.
• On the second day, few more bulls initiated their long position and a green candle is observed again, indicating buyers are aggressive.
• On the third day, since the buyers are still aggressive, there is a small gap up and few more bulls initiate their long, resulting again in a green candle.
• On the fourth day, the candle opened gap up, but those bulls who were in the rally for a long time felt the stock is now at premium and they initiated a long unwinding.
• Also few bears who felt the stock was at a higher rate, initiated their short position. This led to a large red candle which closed below the open of the first green candle.
• Now there is a possibility of trend reversal, which happens when a long red candle is formed on the following day.
• Also there is a chance for trend continual too. Since the move was sudden and violent, many traders are still bullish given the rising trend. As a result, a bullish rally might be seen again shortly thereafter.

This type of pattern often acts as a trap and those bears who want to go short in the rally should confirm the formation of a large red candle with its close lower than the previous red candle. Only then there will be bearishness in the market.

Bearish three line strike pattern 

• It is a four candlestick pattern observed during a bearish rally.
• It is the opposite of bullish three line strike pattern
• This pattern generally indicates a trend reversal, however, there is a chance of trend continual based on the fifth candle formed.

Traders Psychology:

• As there is a bearish rally in the market, the first candle formed is a red candle.
• On the second day, few more bears initiated their short position and a red candle is observed again, indicating sellers are aggressive.
• On the third day, since the sellers are still aggressive, there is a small gap down and few more bears initiate their short, resulting again in a red candle.
• On the fourth day, the candle opened gap down, but those bears who were in the rally for a long time felt the stock is now at discount and they initiated short covering.
• Also few bulls who felt the stock was at lower late, initiated their long position. This led to a large green candle which closed above the open of the first red candle.
• Now, there is a possibility of trend reversal, which happens when a long green candle is formed on the following day.
• Also there is a chance for trend continual too. Since the move was sudden and violent, many traders are still bearish given the falling trend. As a result, a bearish rally is again seen shortly thereafter.

This type of pattern often acts as a trap and those bulls who want to go long in the rally should confirm the formation of a large green candle with its close higher than the previous green candle. Only then there will be bullishness in the market.