Definition:
The pattern is characterized by two long white candlesticks
with a gap upward between them during an uptrend. The
third day is a black candlestick, which closes the gap
between the first two. A support for uptrend may be
forming caused by temporary profit taking.
Recognition Criteria:
1. Market is characterized by uptrend.
2. We see two long white candlesticks with a gap between
them.
3. Then we see the black candlestick on the third day,
which opens within the body of the second day.
4. The third black candlestick fills the gap between
the first two days.
Explanation:
With the Bullish Upside Gap Three Methods Pattern,
the market is in a strong bullish mood. The bullish
move goes on further by another day that gaps in the
direction of the uptrend. However the third day opens
well into the body of the second day filling the gap.
The gap-closing move may be interpreted as supporting
the current uptrend. Gaps create excellent support and/or
resistance points, which however becomes evident after
a reasonable period of time. The gap here is filled
within one day suggesting other considerations. If this
is the first gap of a move, then the third day action,
also called reaction day, can be considered as profit
taking. It is usually defined as a closing gap movement
in technical analysis.
Important Factors:
This Bullish Upside Gap Three Methods Pattern is a
simple pattern similar to the Bullish Upside Tasuki
Gap Pattern. However the Bullish Upside Tasuki Gap Pattern
is characterized by a gap in the first two days and
it is not filled on the third day.
A confirmation on fourth day is required in the form
of a white candlestick, a large gap up or higher close.
