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  • Table of Contents
    • Overview
      • Why Analyze Securities?
      • Technical Analysis
      • Fundamental Analysis
      • Random Walk vs. Non-Random Walk
      • Asset Allocation and Diversification
      • John Murphy's 10 Laws of Technical Trading
      • John Murphy's "Charting Made Easy" eBook
      • Technical Analysis 101
        • TA 101 – Part 1
        • TA 101 – Part 2
        • TA 101 – Part 3
        • TA 101 – Part 4
        • TA 101 – Part 5
        • TA 101 – Part 6
        • TA 101 – Part 7
        • TA 101 – Part 8
        • TA 101 – Part 9
        • TA 101 – Part 10
        • TA 101 – Part 11
        • TA 101 – Part 12
        • TA 101 – Part 13
        • TA 101 – Part 14
        • TA 101 – Part 15
        • TA 101 – Part 16
        • TA 101 – Part 17
      • Irrational Exuberance
      • Cognitive Biases
      • Arthur Hill on Goals, Style and Strategy
      • Arthur Hill on Moving Average Crossovers
      • Multicollinearity
      • "The Trader's Journal" by Gatis Roze
        • Stage 1: Money Management
        • Stage 2: Business of Investing
        • Stage 3: The Investor Self
        • Stage 4: Market Analysis
        • Stage 5: Routines
        • Stage 6: Stalking Your Trade
        • Stage 7: Buying
        • Stage 8: Monitoring Your Investments
        • Stage 9: Selling
        • Stage 10: Re-Examine, Refine, Re-Enhance
        • Additional Reading
      • Bob Farrell's 10 Rules
      • Richard Rhodes' Trading Rules
      • Donchian Trading Guidelines
      • Why and How To Use Correlation
    • Chart Analysis
      • What Are Charts?
      • Support & Resistance
      • Trend Lines
      • Gaps and Gap Analysis
      • Introduction to Chart Patterns
      • Chart Patterns
        • Broadening Top or Megaphone Top
        • Double Top Reversal
        • Double Bottom Reversal
        • Head and Shoulders Top
        • Head and Shoulders Bottom
        • Falling Wedge
        • Rising Wedge
        • Rounding Bottom
        • Triple Top Reversal
        • Triple Bottom Reversal
        • Bump and Run Reversal
        • Flag, Pennant
        • Symmetrical Triangle
        • Ascending Triangle
        • Descending Triangle
        • Rectangle
        • Price Channel
        • Measured Move—Bullish
        • Measured Move—Bearish
        • Cup With Handle
      • Chart Types
        • Arms CandleVolume
        • CandleVolume
        • Elder Impulse System
        • EquiVolume
        • Heikin-Ashi Candlesticks
        • Kagi Charts
        • Renko Charts
        • Three Line Break Charts
        • MarketCarpets
        • Relative Rotation Graphs (RRG Charts)
        • Seasonality Charts
        • Yield Curve
      • Candlestick Charts
        • Introduction to Candlesticks
        • Candlesticks and Traditional Chart Analysis
        • Candlesticks and Support
        • Candlesticks and Resistance
        • Candlestick Bullish Reversal Patterns
        • Candlestick Bearish Reversal Patterns
        • Candlestick Pattern Dictionary
      • Point and Figure Charts
        • Point and Figure Basics
          • Introduction to Point & Figure Charts
          • Point & Figure Scaling and Timeframes
          • P&F Trend Lines
        • Classic Patterns
          • P&F Bullish Breakouts
          • P&F Bearish Breakdowns
          • P&F Signal Reversed
          • P&F Catapults
          • P&F Triangles
          • P&F Bull & Bear Traps
        • P&F Price Objectives
          • P&F Price Objectives: Breakout and Reversal Method
          • P&F Price Objectives: Horizontal Counts
          • P&F Price Objectives: Vertical Counts
        • Point & Figure Indicators
        • P&F Scans and Alerts
          • P&F Pattern Alerts
      • Chart Annotation Tools
        • Andrews' Pitchfork
        • Stock Market Cycles
        • Fibonacci Retracements
        • Fibonacci Arcs
        • Fibonacci Fans
        • Fibonacci Time Zones
        • Quadrant Lines
        • Raff Regression Channel
        • Speed Resistance Lines
    • Technical Indicators & Overlays
      • Introduction to Technical Indicators and Oscillators
      • Technical Indicators
        • Accumulation/Distribution Line
        • Alligator Indicator
        • Aroon
        • Aroon Oscillator
        • ATR Bands
        • ATR Trailing Stops
        • Average Directional Index (ADX)
        • Average True Range (ATR) and Average True Range Percent (ATRP)
        • Balance of Power (BOP)
        • Bollinger BandWidth
        • %B Indicator
        • Chaikin Money Flow (CMF)
        • Chaikin Oscillator
        • Chande Trend Meter (CTM)
        • CMB Composite Index
        • Commodity Channel Index (CCI)
        • ConnorsRSI
        • Coppock Curve
        • Correlation Coefficient
        • DecisionPoint Price Momentum Oscillator (PMO)
        • Detrended Price Oscillator (DPO)
        • Distance From Highs
        • Distance From Lows
        • Distance To Highs
        • Distance To Lows
        • Distance From Moving Average
        • Ease of Movement (EMV)
        • Force Index
        • Gopalakrishnan Range Index
        • High Low Bands
        • High Minus Low
        • Highest High Value
        • Linear Regression R2
        • Lowest Low Value
        • Mass Index
        • MACD (Moving Average Convergence/Divergence) Oscillator
        • MACD-Histogram
        • MACD-V
        • MACD-V Histogram
        • Median Price
        • Money Flow Index (MFI)
        • Negative Volume Index (NVI)
        • On Balance Volume (OBV)
        • Percentage Price Oscillator (PPO)
        • Percentage Volume Oscillator (PVO)
        • Performance Spread
        • Price Relative/Relative Strength
        • Pring's Know Sure Thing (KST)
        • Pring's Special K
        • Rate of Change (ROC)
        • Relative Strength Index (RSI)
        • Relative Volume (RVOL)
        • RRG Relative Strength
        • StockCharts Technical Rank
        • Slope
        • Standard Deviation (Volatility)
        • Stochastic Oscillator (Fast, Slow, and Full)
        • StochRSI
        • Traffic Light
        • TRIX
        • True Range
        • True Strength Index
        • TTM Squeeze
        • Typical Price
        • Ulcer Index
        • Ultimate Oscillator
        • Vortex Indicator
        • Weighted Close
        • Williams %R
      • Technical Overlays
        • Anchored VWAP
        • Bollinger Bands
        • Chandelier Exit
        • Double Exponential Moving Average (DEMA)
        • Hull Moving Average (HMA)
        • Ichimoku Cloud
        • Kaufman's Adaptive Moving Average (KAMA)
        • Keltner Channels
        • Linear Regression Forecast
        • Linear Regression Intercept
        • Moving Averages—Simple and Exponential
        • Moving Average Ribbon
        • Moving Average Envelopes
        • Parabolic SAR
        • Pivot Points
        • Price Channels
        • Triple Exponential Moving Average (TEMA)
        • Volume-by-Price
        • Volume-Weighted Average Price (VWAP)
        • ZigZag
    • Market Indicators
      • Introduction to Market Indicators
        • Market Indicator Dictionary
      • Advance-Decline Line
      • Advance-Decline Percent
      • Advance-Decline Volume Line
      • Advance-Decline Volume Percent
      • Arms Index (TRIN)
      • Bullish Percent Index (BPI)
      • DecisionPoint Intermediate-Term Breadth Momentum Oscillator (ITBM)
      • DecisionPoint Intermediate-Term Volume Momentum Oscillator (ITVM)
      • DecisionPoint Swenlin Trading Oscillator (STO)
      • High-Low Index
      • High-Low Percent
      • McClellan Oscillator
      • McClellan Summation Index
      • Net New 52-Week Highs
      • Percent Above Moving Average
      • Pring's Bottom Fisher
      • Pring's Diffusion Indicators
      • Pring's Inflation and Deflation Indexes
      • Pring's Net New High Indicators
      • Put/Call Ratio
      • Record High Percent
      • Volatility Indices
    • Market Analysis
      • Dow Theory
      • Sector Rotation Analysis
      • Intermarket Analysis
      • The DecisionPoint Chart Gallery
      • DecisionPoint Rydex Asset Analysis
      • Wyckoff Analysis Articles
        • Wyckoff Market Analysis
        • Wyckoff Stock Analysis
        • The Wyckoff Method: A Tutorial
      • Elliott Wave Analysis Articles
        • Introduction to Elliott Wave Theory
        • Identifying Elliott Wave Patterns
        • Guidelines for Applying Elliott Wave Theory
    • Trading Strategies & Models
      • DecisionPoint Trend Model
      • Trading Strategies
        • Bollinger Band Squeeze
        • CCI Correction
        • CVR3 VIX Market Timing
        • Faber's Sector Rotation Trading Strategy
        • Gap Trading Strategies
        • Harmonic Patterns
        • Hindenburg Omen
        • Ichimoku Cloud Trading Strategies
        • The 'Last' Stochastic Technique
        • MACD Zero-Line Crosses With Swing Points
        • Moving Average Trading Strategies
          • Finding Support and Resistance in Moving Averages
          • Guppy Multiple Moving Average: An MA Ribbon Designed to Tip the Market’s Hand
          • How To Trade Price-to-Moving Average Crossovers
          • Trading the Bounce: Finding Support and Resistance in Moving Averages
          • Trading the Death Cross
          • Trading Using the Golden Cross
          • Using the 5-8-13 EMA Crossover for Short-Term Trades
        • Moving Momentum
        • Narrow Range Day NR7
        • Percent Above 50-day SMA
        • Percent B Money Flow
        • The Pre-Holiday Effect
        • RSI(2)
        • Six-Month Cycle MACD
        • Slope Performance Trend
        • Stochastic Pop and Drop
        • Swing Charting
        • Trend Quantification and Asset Allocation
    • Index & Market Indicator Catalog
      • Advance-Decline Indicators
      • Cboe Indices and Indicators
      • CME Futures and Spot Prices
      • DecisionPoint Sentiment Indicators
      • Dow Jones Breadth Indicators
      • Dow Jones Global Indices
      • Dow Jones Select Indices
      • Dow Jones Titans Indices
      • Dow Jones US Indices
      • Economic Indicators
      • ICE Futures and Spot Prices
      • Intellidex Indices
      • MSCI Indices
      • New 52-week Highs and Lows for Exchanges
      • NYSE Arca Equity Indices
      • NYSE Equity Indices
      • Philadelphia Indices
      • S&P 500 Sector and Industry Groups
      • S&P GSCI Indices
      • StockCharts AD Percent
      • StockCharts AD Volume Percent
      • StockCharts Bullish Percent Index
      • StockCharts High-Low Index
      • StockCharts High-Low Percent
      • StockCharts Percent Above Moving Average
      • StockCharts Pseudo Symbols
      • StockCharts Record High Percent
      • StockCharts Theoretical Indices
      • US Treasury Yields
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On this page
  • What Are Three Line Break Charts?
  • Construction of Three Line Break Charts
  • Two Line Reversals
  • Three Line Reversals
  • Support and Resistance
  • Classic Patterns
  • Concluding Thoughts
  • Three Line Break Charts In SharpCharts
  • Further Study

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  1. Table of Contents
  2. Chart Analysis
  3. Chart Types

Three Line Break Charts

PreviousRenko ChartsNextMarketCarpets

Last updated 10 months ago

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What Are Three Line Break Charts?

Three Line Break charts originated in Japan. They ignore time and only change when prices move a certain amount (similar to Point & Figure Charts). Three Line Break charts show a series of vertical white and black lines; the white lines represent rising prices, while the black lines portray falling prices. Prices continue in the same direction until a reversal is warranted. A reversal occurs when the closing price exceeds the high or low of the prior two lines.

Construction of Three Line Break Charts

Before looking at construction details, a couple of clarifications are needed.

  1. The black and white bars on the price chart are called “lines”.

  2. Line changes are based on closing prices, not the high-low range.

  3. Three Line Break charts evolve based on price, not time.

The first chart below shows 85 candlesticks or trading days from March 21 to July 20. A Three Line Break chart condenses this price action into 44 black and white lines. This technique filters the noise to focus only on price movements that are deemed significant.

Two Line Reversals

Each new closing price produces three possibilities.

  • A new line of the same color is drawn when the price extends in the same direction.

  • A new line in the opposite color is drawn when the price change is enough to warrant a reversal.

  • No new lines are added when the price doesn't extend the trend or the change is insufficient to warrant a reversal.

The high or low of the prior two lines sets the reversal point. If the most recent line is black (down), the high of the last two lines marks the reversal point. A close above this high would call for a white line to denote a price reversal. Remember that only the most recent line must be black (down). The line just before this black line can be white (up) or black (down). It is the low of these two lines that dictate the reversal point.

The chart below shows Dell Inc. (DELL) with three two-line reversals; the first two formed with two black lines, while the third formed with a white line and a black line. The horizontal red lines mark the reversal point, which the white line exceeds to forge the reversal.

If the most recent line is white (up), then the low of the last two lines marks the reversal point. A close below this low would call for a black line to note a price reversal. Only the most recent line must be white (up). The line just before this white line can be white (up) or black (down); the low of these two decides the reversal point.

The chart below shows United Parcel (UPS) with three 2-line reversals. The first and third reversals feature a black line/white line combination, while the middle reversal shows two white lines. The horizontal green lines mark the lows or reversal points, which the subsequent black line exceeds to forge the reversal.

Three Line Reversals

As the name implies, the Three Line Break Chart is about breaking three lines. Two-line reversals can occur in a trading range or as a continuation of the bigger trend. A Three Line Break, on the other hand, denotes a stronger move that can signal a trend reversal. A bullish trend reversal occurs when three black lines form and a single white line breaks the high of these lines. A bearish reversal occurs when three white lines form and a single black line breaks the low of these three lines.

The chart below shows the Russell 2000 ETF (IWM) moving from a downtrend to an uptrend and back to a downtrend.

The downtrend starts with the first black line on June 6. A new black line will not be drawn unless prices move below this low. Notice how the date moved from June 6 to June 8 without a line in between (1).

June 7 is not shown because prices didn't move enough to justify a new black line or a white reversal line. Prices moved to a new low on June 8 to justify a new black line. This downtrend continued until the closing price exceeded the high of the prior three black lines (2). This 3-Line Break signaled the start of a new uptrend on June 21. Prices traded within the range of this white line until June 28 (3). On June 28th, five trading days later, prices exceeded this high to justify a new white line. Prices continued higher for the next six trading days as new white lines were added daily. The uptrend reversed when prices moved below the low of the prior three white lines (4). This 3-Line Break justified a new black line to signal the start of a downtrend.

Support and Resistance

Three Line Break Charts produce clear reaction highs and lows upon which to base resistance and support. Chart analysis works the same way as on a bar or candlestick chart.

The example below shows Constellation Energy (CEG) with a clear resistance zone marked by three reaction highs. The stock broke resistance with a surge in early April and continued much higher. Also, notice that a falling flag or channel formed in February.

Classic Patterns

Concluding Thoughts

Like their other Japanese cousins (Kagi and Renko), Three Line Break charts filter out the noise by focusing exclusively on price changes. The lines don't change unless price changes by a specific amount.

In contrast to Point & Figure charts, which used a fixed box size, this amount depends on the range of the last two lines. This range can vary. The ability to filter noise makes these charts especially useful for determining the underlying trend. It's easy to spot important highs and lows. With this information, chartists can identify uptrends with higher highs and higher lows or downtrends with lower lows and lower highs. As with all charting techniques, consider employing other technical analysis tools to confirm or refute your findings on Three Line Break charts.


Three Line Break Charts In SharpCharts

Three Line Break Charts can be drawn in SharpCharts by selecting Three Line Break for Type under Chart Attributes. Check the color prices box to see red lines for the down periods.




Further Study

As the name implies, this book goes beyond candlesticks to show chartists other technical analysis techniques that originated in Japan. Nison devotes an entire chapter to Three Line Break charts; additionally, he covers Renko charts, Kagi charts and explains how Japanese traders use moving averages.

Double Bottom, Double Top, Head-and-Shoulders Patterns, Triangles, and others can form on Three Line Break charts. The chart below shows Vulcan Materials (VMC) with a large forming from January to May. The stock broke the lower trend line and support with a sharp decline in early May.

for a live example.

Steve Nison

Symmetrical Triangle
Beyond Candlesticks
Click here
Traditional candlestick chart shows 85 trading days between March 21 and July 20.
Three Line Break chart condenses the information in a traditional candlestick chart.
Two-line reversals
The first and third reversals feature a black and white line combination; the middle reversal shows two white lines.
Three Line Break chart showing a move from a downtrend to an uptrend and back to a downtrend.
Support and resistance levels in Three Line Break chart.
A support break of a symmetrical triangle is seen in the chart of Vulcan Materials.
Three-Line Break chart using SharpCharts.
SharpChart settings for Three Line Break chart in SharpCharts.
Traditional candlestick chart from StockCharts.com
Three-line break chart from StockCharts.com that condenses the information from a candlestick chart.
Chart from StockCharts.com showing two line reversals
Two-line reversals featuring a black and white combination and two white line combinations from StockCharts.com
Three-Line Break chart showing a move from a downtrend to an uptrend and back to a downtrend
Three Line Break chart from StockCharts.com showing a support break of a symmetrical triangle formation.
Three Line Break chart using SharpCharts
SharpChart settings for Three Line Break chart in SharpCharts