Downside Tasuki Gap
Reference values based on Bulkowski's "Encyclopedia of Chart Patterns". Data is primarily from U.S. markets and may differ for other markets.
A three-candlestick bearish continuation pattern appearing during a downtrend. A bearish candle appears with a gap down, followed by a bullish candle that rallies into the gap but fails to fill it. The unfilled gap indicates that sellers remain in control, suggesting a selling opportunity on the rally and continued downside.
Enter short after confirming the third bullish candle is complete and the gap remains unfilled. Selling on the rally near the third candle's high is ideal.
Project the gap size downward from the third candle's low. Or target the most recent low.
Place a stop-loss slightly above the gap's upper limit (first candle's low). If the gap is filled, the pattern is negated; exit.
If the second gap-down bearish candle has increased volume while the third bullish candle has decreased volume, buying pressure is limited and downtrend continuation reliability is high.