Three-Line Patterns

This section is part of our candlestick patterns blog series. Please see The Patterns Dictionary for more details.

Three-line patterns, as the name implies, are composed of three candlesticks. In general, they are seen less frequently than most two-line patterns.

Not all three-line patterns have a Japanese origin. There are many patterns that were introduced, for example, by Morris, and later duplicated by others, quite often without any occurrence frequency or efficiency analysis.

Introducing a new pattern makes sense only when it appears so frequently that we can draw a meaningful conclusion from its statistics. As a rule of thumb, the more frequently a pattern appears on the charts, the more useful it may be in terms of using it in real-life trading. A pattern that appears once every few years or less is often useless.

Some very rarely occurring patterns were proposed many years ago, when the markets were not so liquid, and candles such as marubozu or doji were occurring more often than they do today.

CandleScanner recognizes 28 three-line patterns, which can be categorized as follows:

  • 9 bullish reversal
  • 13 bearish reversal
  • 3 bullish continuation
  • 3 bearish continuation
Figure 1.

Figure 1. Three-line patterns.

Patterns Extending Two-Line Patterns

Some three-line patterns are simply extensions of two-line patterns. In other words, in some two-line patterns, a third candle line is added, but the forecast of the pattern is not changed. Morris, who is the author of these extended patterns, claims that the extension acts as a two-line pattern confirmation. However, in our opinion, it does not mean that such extended patterns should not be confirmed. Readers can check this themselves while using the CandleScanner.

The following are patterns belonging to this group:

Stick Sandwich pattern

Many sources mention the Stick Sandwich pattern. While developing CandleScanner, we made a decision not to include this pattern. First of all, Shimizu and Nison are not describing this pattern at all. Furthermore, Morris and Bulkowski provide completely different descriptions. On the internet, you can mostly find Morris's version (for example, Bigalow's site).

Morris also is not consistent while describing the Stick Sandwich pattern. The first edition of his book, "Candlestick Charting Explained: Timeless Techniques for Trading Stocks and Futures" from 1995 mentioned that the pattern should be confirmed. The edition from 2006 of this book claims the opposite.

Finally, the pattern, and no matter whether using Bulkowski's or Morris's approach, is very rare, hence, not useful for traders.

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