Bullish Long Line

The bullish long line, also known as the bullish long white line, is a frequently occurring one-bar Japanese candlestick pattern that historically leads to short-term downside volatility.

But what if I told you that you could turn this mediocre pattern into a money-maker across all markets by using history as your guide?

If this excites you, let’s learn how to trade these bullish long line patterns using a data-driven trading strategy.

What Is a Bullish Long Line Candlestick Pattern?

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

The bullish long line is a frequent one-bar pattern that most traders consider a bullish candlestick continuation pattern. Unfortunately, conventional wisdom is wrong, and intelligent traders should look in the other direction.

The name “bullish long line” comes from the pattern resembling a long line on the candlestick chart.

But before we dive into the history of these long line candlesticks and how to trade them, let’s learn how to identify them on our candlestick charts.

How to Identify the Bullish Long Line Candlestick Pattern

Bullish Long Line Candlestick Pattern on the Microsoft (MSFT) October 29th, 2021 daily chart
Bullish Long Line Candlestick Pattern on the Microsoft (MSFT) October 29th, 2021 daily chart

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

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

This is one of the most straightforward patterns to identify since it is a single bar that doesn’t require a trend. 

We see the bullish long line on the Microsoft chart on the October 29th, 2021, daily chart.

There’s a large green candle with short upper and lower shadows. The upper wick is slightly longer than the lower wick, demonstrating selling pressure. 

Now that we know how to identify this supposed bullish reversal pattern, let’s learn the best trading strategy to make our profits go in a straight long line upward. 

How to Trade the Bullish Long Line Pattern

The bullish long line is best traded bearishly across all markets, expecting a longer-term risk-reward reversal.

But before we cover the best long line trading strategy, let’s learn how most traders go in the opposite direction.

Bullish Long Line Candlestick Continuation Trade Setup

Bullish Long Line Bullish Continuation Trade Setup on the Netflix (NFLX) December 21st, 2021 daily chart
Bullish Long Line Bullish Continuation Trade Setup on the Netflix (NFLX) December 21st, 2021 daily chart

We see the bullish long line on the Netflix candlestick chart above –  a single long green candle with short upper and lower shadows. With the pattern identified, most traders go bullish.

Traders typically enter long on a break of the high and place a stop loss below the low of the bullish candlestick.

This trade produced profits for this stock trader, but they’re going against the winds of history.

The best bullish long line strategy is to treat this as a bearish pattern.

Bullish Long Line Candlestick Reversal Trade Setup

Bullish Long Line Bearish Reversal Trade Setup on the Bitcoin (BTCUSD) December 15th, 2021 daily chart
Bullish Long Line Bearish Reversal Trade Setup on the Bitcoin (BTCUSD) December 15th, 2021 daily chart

We see the bullish long line on the Bitcoin daily occurring on December 15th, 2021. Data-driven traders understand this is a bearish pattern, expecting the significant move to retrace.

Savvy traders go short when the price falls below the close, and they place a stop loss above the high of the candlestick, significantly improving their profits according to history.

Speaking of profits, what do our backtest results tell us about the best bullish long line trading strategy?

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

I backtested the bullish long line candlestick pattern on the daily timeframe in the crypto, forex, and stock markets using the following rules:

  • 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 are similar to bullish long line patterns.

Bearish Long Line vs. Bullish Long Line

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

The bearish long line candlestick pattern and the bullish long line pattern are opposites. Both are single-bar patterns that don’t require a trend. Additionally, they both are considered by many to be continuation patterns when the data tells us they should be traded as reversals.

Their color is the only difference between the bearish and bullish long lines.

Bullish Short Line vs. Bullish Long Line

Bullish Short Line Candlestick Pattern Illustration © Analyzing Alpha
Bullish Short Line Candlestick Pattern Illustration

The bullish short line candlestick pattern and the bullish long line pattern are close cousins. Neither requires a trend. The only difference between the bullish short line and the bullish long line is the length of their real bodies.

The Bottom Line

The bullish long line frequently occurs in all markets. The pattern is best traded as a bearish candlestick reversal using the close as an entry and the high as the stop loss, expecting a longer-term move.

Pretty astounding, right? Almost all traditional candlestick advice is wrong. Analyze the data to learn the best trend reversal candlestick patterns.

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