Case Studies: Three Line Strike, Morning Star, and Evening Star
The Black Book of Day Trading Strategies
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Introduction
Theory is important, but there is no substitute for practical experience. In this article, we will move from the theoretical to the practical, analyzing real-world examples of the Three Line Strike, Morning Star, and Evening Star candlestick patterns. These case studies will provide valuable insights into how these patterns play out in different markets and timeframes, and they will help you to develop a more intuitive understanding of their practical application.
Case Study 1: Bullish Three Line Strike in the S&P 500
Our first case study is a bullish Three Line Strike that occurred in the S&P 500 in March 2020. The market had been in a strong uptrend for several weeks, but it was starting to show signs of exhaustion. The bullish Three Line Strike appeared after a brief pullback, and it signaled a continuation of the uptrend. The pattern was confirmed by a bullish candle that closed above the high of the strike candle, and the price went on to make a new high.
| Date | Open | High | Low | Close | Volume |
|---|---|---|---|---|---|
| 2020-03-10 | 2850.12 | 2885.34 | 2734.43 | 2882.23 | 5.2B |
| 2020-03-11 | 2863.09 | 2891.21 | 2731.33 | 2741.38 | 5.5B |
| 2020-03-12 | 2732.13 | 2767.88 | 2478.86 | 2480.64 | 7.4B |
| 2020-03-13 | 2569.99 | 2711.56 | 2492.37 | 2711.02 | 7.2B |
Case Study 2: Morning Star in the EUR/USD
Our second case study is a Morning Star that occurred in the EUR/USD in May 2021. The currency pair had been in a downtrend for several days, but it was starting to find support at the 1.2000 level. The Morning Star appeared after a period of consolidation, and it signaled a reversal of the downtrend. The pattern was confirmed by a bullish candle that closed above the high of the third candle, and the price went on to rally to the 1.2200 level.
| Date | Open | High | Low | Close | Volume |
|---|---|---|---|---|---|
| 2021-05-10 | 1.2168 | 1.2182 | 1.2126 | 1.2131 | N/A |
| 2021-05-11 | 1.2131 | 1.2152 | 1.2125 | 1.2150 | N/A |
| 2021-05-12 | 1.2150 | 1.2151 | 1.2051 | 1.2071 | N/A |
| 2021-05-13 | 1.2071 | 1.2100 | 1.2052 | 1.2080 | N/A |
Case Study 3: Evening Star in the GBP/USD
Our third case study is an Evening Star that occurred in the GBP/USD in June 2021. The currency pair had been in an uptrend for several weeks, but it was starting to show signs of resistance at the 1.4200 level. The Evening Star appeared after a period of consolidation, and it signaled a reversal of the uptrend. The pattern was confirmed by a bearish candle that closed below the low of the third candle, and the price went on to fall to the 1.3800 level.
| Date | Open | High | Low | Close | Volume |
|---|---|---|---|---|---|
| 2021-06-01 | 1.4219 | 1.4250 | 1.4153 | 1.4153 | N/A |
| 2021-06-02 | 1.4153 | 1.4177 | 1.4127 | 1.4169 | N/A |
| 2021-06-03 | 1.4169 | 1.4200 | 1.4082 | 1.4109 | N/A |
| 2021-06-04 | 1.4109 | 1.4190 | 1.4082 | 1.4185 | N/A |
Conclusion
These case studies provide a glimpse into the practical application of the Three Line Strike, Morning Star, and Evening Star candlestick patterns. By studying real-world examples of these patterns, you can develop a more intuitive understanding of their behavior and improve your ability to trade them profitably. The final article in this series will provide a summary of the key takeaways from this series and offer some final thoughts on the art of candlestick pattern trading.