Type 1 close is when the candle closes the wick on the trendline. Type 2 close is when the candle body closes on the trendline.

This means that there was a big limit order that got filled. Usually, institutions will set multiple limit orders so you might see a spike in volume (orders being filled) which confirms that there was in fact activity.

Type 3 closes are closes that either break through the wick or body. I don't enter if I see this type of close.