The Thrusting Line: An Overview
Stock traders are constantly on the watch for patterns that can be interpreted as an indication of the direction a stock they are watching will take next. The thrusting line is one such pattern.
The thrusting line is actually an aspect of a two-candlestick pattern. The candlestick pattern, a rectangle with wick-like protrusions at both ends, shows the movement of a stock in a single session, from its lowest price to its highest price. A two-candlestick pattern shows two cycles.
A thrusting line is a two-candle pattern in which the first candle is a large down candle (with a longer wick at the bottom) and the second candle is an up candle (with a longer wick at the top).
Where the second candle opens and closes indicates the strength of buying pressure, and whether that pressure is likely to continue. Put another way, the second candle is attempting to thrust upward into the selling pattern that occurred on the previous candle.
- A thrusting line is a two-candle candlestick pattern indicates whether buying pressure on a stock is weakening, strengthening, or staying neutral.
- Traders watch the pattern to identify the right time to buy a stock with the expectation that its price will continue to rise.
- The thrusting line identifies only a short-term pattern and is not useful in picking stocks for the long term.
Understanding the Thrusting Line
A thrusting line is categorized in one of three ways: continuation, neutral, and reversal.
- If the second candle opens well below the close of the first candle and closes near the close of the first candle, it indicates a weak bullish move. The downward trend is likely to continue. Selling is likely to resume on the following sessions, or candles.
- If the second candle opens below the close of the first but closes near or slightly above the close of the second, the pattern is neutral. The price could go higher or lower in the next session. The message is that the bulls managed to gain some ground but the sellers were stronger on the prior day.
- If the price of the second candle opens near the close of the first candle and closes near the mid-point of the first candle, it signals an upside reversal. The bulls have managed to erase much of the prior loss. Some sellers are likely to pause, and more buyers may jump in. This pattern should lead to a further gain in price.
Two candles are not always significant in and of themselves. Most traders look for actionable patterns within a longer timeline, hoping to spot a trend or a pullback in price that gives them an opportunity.
For example, during a strong uptrend, a trader will look for an upward reversal thrusting line to signal that the pullback is over and it's a good time to buy.
On the other hand, if a downward continuation thrusting line develops, the trader may initiate a short trade, betting on a further decline.
Real-World Example of a Thrusting Line
The daily Facebook Inc. (FB) chart shows two thrusting line patterns. In both cases, the price dropped via a red downward candle. The following daily candle opened lower but then proceeded to rally above the close of the first down candle. The price didn't reach the mid-point of the first candle, but it did close well above the close of the first. These are neutral to bullish thrusting patterns, and the price continued to move higher on the following candles, for both patterns.
The Thrusting Line vs. the Piercing Pattern
The patterns are quite similar. In a thrusting line, the second candle closes at or below the mid-point of the first candle. A piercing pattern is more bullish. The second candle closes above the mid-point but below the open of the first down candle.
Limitations of the Thrusting Line Candlestick Pattern
Not all thrusting lines continue to develop as their watchers hope and expect they will.
Thrusting patterns are best used in addition to other forms of analysis such as trend analysis, other price action signals, and technical indicators.
In any case, a thrusting line can provide only a short-term outlook for the price direction of a stock. The pattern doesn't provide a profit target for how far the price could run. The trader must rely on some other method to signal the right time for an exit from any trades made based on these patterns.