Bearish Long Line Explained & Backtested (2024)

The bearish long line is a one-bar bearish continuation Japanese candlestick pattern that historically leads to short-term volatility in all markets tested.

But before you slice this with a shuriken, what if I told you that this candle produces windfall profits when traded correctly?

If this gets you excited, let’s dive in on how to trade this bearish long line candlestick pattern in a data-driven way.

What Is a Bearish Long Line Candlestick Pattern?

Bearish Long Line Candlestick Pattern Illustration © Analyzing Alpha
Bearish Long Line Candlestick Pattern Illustration

The bearish long line is a one-bar candlestick pattern that most traders consider bearish.

The bearish long line pattern’s name comes from how it looks on a candlestick chart.

But before we comb through the annals of this candlestick pattern’s history, let’s learn how to identify them on our candlestick charts.

How to Identify the Bearish Long Line Candlestick Pattern

Bearish Long Line Candlestick Pattern on the Tesla (TSLA) May 10th, 2021 daily chart.
Bearish Long Line Candlestick Pattern on the Tesla (TSLA) May 10th, 2021 daily chart.

The following are the requirements for a valid long line pattern:

  • The candle must have a long bearish real body with short upper and lower wicks.

We see the bearish long line on the Tesla (TSLA) May 10th, 2021 daily chart.

The candle is a large red bearish candle with short upper and lower shadows. That’s it. It’s a single candle with no trend requirement.

Now that we’ve identified the price action on our charts, let’s learn how to trade this frequently occurring pattern.

How to Trade the Bearish Long Line Pattern

The bearish long line performs best as a bullish reversal in the stock and crypto markets and, as intended – a bearish continuation in the forex market. 

Let’s learn how to trade both of these setups.

Bearish Kicking Bearish Reversal Trade Setup

Bearish Long Line Bearish Reversal Trade Setup on the Microsoft (MSFT) July 27th, 2015 daily chart.
Bearish Long Line Bearish Reversal Trade Setup on the Microsoft (MSFT) July 27th, 2015 daily chart.

We see a long red bear candle with two small wicks. No trend is necessary, so we’ve got the signal.

Traditional traders enter short on a break of the low of the long line candle, and if they’re trading forex, they’re making mad cash if we use history as a guide.

Unfortunately, if those traders attempt to go bear in the stock markets, they will likely lose their capital quite quickly.

Instead, these traders need to look bullish.

Bearish Long Line Bullish Continuation Trade Setup

Bearish Long Line Bullish Continuation Trade Setup on the Apple (AAPL) February 3rd, 2016 daily chart.
Bearish Long Line Bullish Continuation Trade Setup on the Apple (AAPL) February 3rd, 2016 daily chart.

We see a long bearish candle with two short lower shadows – this is one of the most straightforward patterns to identify. Bullish continuation traders want to go long at a break of the long line candle’s high with a stop loss set just below the low.

In the above Apple example, we see our big red long line. Now we wait up to three days for the price to move above that high to enter. The next day, the price surpasses the high and moves up and to the right.

We can see that this bearish long line trader made significant profits going long when most go short. Well done, data-driven trader. Well done.

Speaking of data, how has this pattern performed historically?

Does the Bearish Long Line Pattern Work? (Backtest Results)

Using the following rules, I backtested the bearish harami cross candlestick pattern on the daily timeframe in the crypto, forex, and stock markets.

  • A close above the 50-day SMA constitutes an uptrend.
  • I tested risk-reward ranges from 1 to 5. 
  • The optimal risk-reward ratio is selected using profit per bar.
  • Entry and exits are discussed in the how-to trade section above.
  • Confirmation must occur within three days of the pattern signal.

Similar Candlestick Patterns

Many candlestick patterns look almost identical to the bearish long line pattern. It’s essential to understand the differences between these related patterns when using candlestick pattern technical analysis.

Bullish Long Line vs. Bearish Long Line Candlestick Patterns

Bearish Long Line Candlestick Pattern Illustration © Analyzing Alpha
Bearish Long Line Candlestick Pattern Illustration

The bullish long line candlestick pattern is the green version of its red friend. The only difference between the bullish long line pattern and the bearish long line is that the bearish one has a black body while the bullish one has a white body.

Both are traditionally traded as continuation patterns, and in most markets, both are usually traded incorrectly.

Bearish Marubozu vs. Bearish Long Line Candlestick Patterns

Bearish Marubozu Candlestick Pattern Illustration © Analyzing Alpha
Bearish Marubozu Candlestick Pattern Illustration

The bearish marubozu is a one-bar pattern almost identical to the bearish long line. The only difference is that the bearish marubozu candlestick patterns do not have wicks while the long line patterns have short upper and lower shadows.

Shooting Star vs. Bearish Long Line Candlestick Patterns

Shooting Star Candlestick Pattern Illustration © Analyzing Alpha
Shooting Star Candlestick Pattern Illustration

The shooting star candlestick pattern often gets confused with the long line. Both are single candlestick patterns with wicks traditionally viewed as bearish reversal patterns.

The big difference between them is that the shooting star candlestick pattern occurs in an uptrend with a large upper wick, whereas the bearish long line doesn’t require a trend and has wicks on both sides.

The Bottom Line

The bearish long line is a relatively frequently occurring pattern that follows the general tendencies of the market it’s in. In other words, it’s a reversal pattern in the mean-reverting crypto and stock markets and a continuation pattern in the large, liquid forex market.

Interested in shooting for the stars? Check out the backtest results for the best list of candlestick patterns.

Leave a Comment

Analyzing Alpha