Upside/Downside Gap Three Methods candlestick pattern

Gap Three Methods is a three candlestick pattern that suggests the continuation of the trend. There are two formations: bearish and bullish. The bearish formation is called the Downside Gap Three Methods and the bullish formation is called the Upside Gap Three Methods.

Both formations are variations of the Upside/Downside Tasuki Gap pattern.

Upside Gap Three Methods

This is the pattern that signals the continuation of the bullish trend. It is a variation of the Upside Tasuki Gap pattern, but, in the Upside Gap Three Methods, the price gap between the 1st and 2nd candlesticks is closed by the 3rd candlestick.

The formation begins with a strong bullish candlestick, which represents a strong presence of bullish activity. The opening price of 2nd candlestick is significantly higher than the previous closing price, resulting in a noticeable upward gap. This candle indicates that the bullish sentiment is still present, although the momentum may be weakening slightly. The 3rd candlestick takes a bearish direction. It starts lower and ends within the body of the first candle, indicating a possible battle between buyers and sellers and a temporary halt in the upward trend.

Construction

1st

• can be observed in strongly established uptrend
• long green body

2nd

• green body
• opens with gap above 1st candlestick^①
• closes above closing price, saving gap

3rd

• red body
• opening price is within body of 2nd candlestick^②
• closing price is within body of 1st candlestick^②
• covers the gap created by 2nd candlestick

Downside Gap Three Methods

It is the pattern signaling the continuation of the bearish trend. The variant of the Downside Tasuki Gap pattern. The same way as with the Upside formation, the gap between the 1st and 2nd is closed by the 3rd candlestick, unlike in the Downside Tasuki Gap.

In the Downside Gap Three Methods we see the opposite market dynamic. Despite the first two bearish candlesticks, the bulls gain control of the market for a short time, indicating a short pause in the downtrend. However, according to the forecast, the downtrend should continue after the bullish pause (3rd candlestick). The body of the 2nd candlestick, which is shorter than the body of the 1st candlestick, can indicate the start of losing the bullish momentum.

Construction

1st

• can be observed in strongly established downtrend
• long red body

2nd

• green body
• red body shorter than 1st candlestick
• opens with gap below 1st candlestick^①

3rd

• green body
• opening price is within body of 2nd candlestick^②
• closing price is within body of 1st candlestick^②
• covers the gap created by 2nd candlestick

The two formations are a weaker version of the Tasuki Gap, that’s why you need to wait for the next candlestick or to use technical indicators for pattern confirmation.