The Three-Line Strike, also known as the fooling three soldiers, is a four-line pattern that occurs during a defined trend. This pattern represents a resting period, but unlike most resting periods, the three-line strike occurs all in one day and it ends up looking like an extended three white soldiers pattern. The criteria required for the three-line strike pattern is pretty simple and is explained below.
Criteria for the Three-Line Strike
- The three white soldiers pattern appears as three white (or green) candles that are continuing the uptrend
- The fourth day opens higher, however it then pulls back to close below the open of the first white (or green) candle
Pattern Psychology
As explained above, the three white soldiers that preclude the fourth day’s black (or red) candle indicate the trend is continuing. The fourth day opens in a manner that resembles the previous days; however, profit-taking sets in so that the fourth candle continues until the close is below the open of the first white (or green) candle. The black (or red) candle body completely negates the rise of the past three days. As a result, the short-term pullback sentiment is out of the way and the uptrend continues on from this point.
One of the biggest misconceptions of investors is that prices move based upon fundamental reasons when in fact prices move based upon the “perception” of fundamental reasons. The Japanese Rice traders discovered this many centuries ago. Why do prices go down when good news is announced? The answer is that the anticipation of that good news was already built into the stock price.
Japanese Candlestick trading signals consist of approximately 40 reversal and continuation patterns. All candlestick patterns have credible probabilities of indicating correct future direction of a price move.
As you learn how to utilize the candlestick signals correctly you will have the knowledge to improve your trading techniques for those trading entities you want to trade. You do not have to depend on canned programs that sometimes work and sometimes don’t work and you do not have to buy or sell stock recommendations blindly based on a research analyst’s recommendation.
Throughout his investment career, Stephen Bigalow has directed his investment acumen towards developing improved methods for extracting profits from the investment markets. His research, encompassing all fundamental and technical methods, resulted in verifying that Candlestick analysis was superior to any other method.
