Investor Education Story

Financial Indicator

Macroaxis News
By Nathan Young

August 9, 2017

The Tasuki Gap candlestick pattern works in both bearish and bullish markets, but let us focus on the bullish market for simplicity purposes. Everything will apply in reverse for the bearish side of the equation. When trying to identify the Tasuki Gap, there are three candlesticks involved.

Tasuki Gap

First, address that the trend is in a bullish trend and has been for a little while. Then, you need to identify the first candle, which is a large bullish candle confirming the current trend. The second candle will be a gap to the upside, and close as a bullish candle. Lastly, the final candle in the pattern will be a bearish candle, but note that the candle does not have to close the gap that has just occurred.

Let us dive into the specifics of the setup. The first candle is a large bullish candle, which can indicated a few things. First, this can mean that buyers have really stepped in and begun to purchase the stock based on any number of factors. Secondly, it could indicate that it hit a certain level in the market, triggering people to flow into the market.

Taking a peek at the second candle, this is a gap up from the first and typically that means there is strong demand going into the next day. Gaps in the chart tend to be filled but that is not always the case.

The last candle is important to note because it can mean a couple things. First, it could mean that too many buyers stepped in and people are simply taking profits off the table. This could also indicate a change in the direction of the market, but that may be the more extreme of the options.

As with any candlestick pattern, they are not one hundred percent, but rather an indication of what may happen. Take note of the market health and movements and begun to set alerts if everything is setting  up to your standards. This candlestick pattern could simply be a play on human emotions, but factor in all data points to formulate a well rounded opinion.

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