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To see the performance of the pattern in your stock exchange in the context of other stock markets please examine the table below. Find your stock market there and see how it ranks among the others. This will give you an idea about the pattern’s strength and reliability and help you in your selling decisions.
BEARISH THREE GAP UPS
Definition
This is a four day bearish reversal pattern. It consists of three consecutive days each gapping higher on the open. After Three Gap Ups the market becomes extremely overbought and ready for the reversal of the current uptrend.
Recognition Criteria
1. The first day can be of any color.
2. The second day also can be of any color, so long as its body gaps up away from the first day’s body.
3. The last two days are white and their bodies must gap up from the bodies of the prior days.
Pattern Requirements and Flexibility
The first two days of the Bearish Three Gap Ups can be of any color but the last two days should be white. There must be upside body gaps between the candlesticks.
Trader’s Behavior
The market is overbought with three gaps up in a row and it is time for profit taking.
Sell/Stop Loss Levels
The confirmation level is defined as the midpoint of the last white body. Prices should cross below this level for confirmation.
The stop loss level is defined as the higher of the last two highs. Following the bearish signal, if prices go up instead of going down, and close or make two consecutive daily highs above the stop loss level, while no bullish pattern is detected, then the stop loss is triggered.