Downside Tasuki Gap

What is a Downside Tasuki Gap?

A Downside Tasuki Gap is a candlestick formation that is commonly used to signal the continuation of the current downtrend. The pattern is formed when a series of candlesticks have exhibited the following qualities:

1. The principal candle is red or back (down) inside an existing downtrend.

2. The second candle gaps below the close of the previous bar and is likewise red (down).

3. The last bar is a white or green (up) candlestick that closes within the gap of the initial two bars. It is important to note that the white candle doesn't have to close the gap completely.

What Does the Downside Tasuki Gap Tell You?

The Downside Tasuki Gap (otherwise called the Bearish Tasuki Gap) is a three-candle continuation pattern. To spot this pattern, keep the following criteria at the top of the priority list.

Initial, an unmistakable downtrend must be available, and there must be a large red/down candle present (candlestick chart tones are adjustable).

Second, following the candle over, the price must gap down and form another large red/dark candle.

Third, a white/green candle must follow the red/dark candle. The green/white candle must open inside the red candle's real body and close above it. This candle shouldn't close the gap between the initial two candles.

Of the three candles included, the initial two must be red/dark and the third will be green/white. To qualify, the second and third candles must be contradicting tones.

The Downside Tasuki Gap pattern's shows the force of the downtrend; the bears are in control and displaying their strength. This downward strength is then enhanced, shown by the price gapping lower and afterward another red candle forming. Notwithstanding, a respite follows this movement as the bulls endeavor to force the price up. Assuming the price can't fill the gap, and the price begins to drop once more, the bulls will probably escape, leaving the existing downtrend to resume.

A few traders opt to enter short close to the close of the white candle, expecting the downtrend will proceed. Others like to trust that the price will drop below the low or open of the white candle. Once more, this gives some confirmation that the price is dropping and the downtrend might resume.

The Downside Tasuki Gap has a partner: the UpsideTasuki Gap. It very well may be spotted by showing similar criteria above, yet in the contrary formation and during an uptrend.

Illustration of How to Trade the Downside Tasuki Gap

The Nvidia Corp. (NVDA) chart shows a downside Tasuki gap pattern. The price is in a short-term downtrend when the pattern shows up. There is a down candle, followed by a gap into one more down candle. There is then an up candle which enters into the gap yet doesn't close it.

Traders could enter short close to the close of that white candle, with a stop loss over the close or over the high of the principal candle in the pattern.

Following the up candle, the price moves lower. In this case, gapping down once more.

The downward movement is brief, however, and the price turns around higher shortly later.

The Difference Between a Downside Tasuki Gap and a Down Gap Side-by-Side White Lines Pattern

The Tasuki gap down is to some degree filled by an up candle. A gap down side-by-side white lines pattern is a gap down followed by side-by-side candles. The pattern likewise denotes a continuation of the current trend.

Limitations of Using the Downside Tasuki Gap

The pattern is three candles in a sea of other price bars. By zeroing in on this pattern a trader could lose setting. For instance, the short-term trend might be down when this pattern happens, yet the more extended term trend might up. Consequently, the price might rise shortly after the pattern, in arrangement with the more extended and more predominant trend.

The pattern isn't extremely common, and in this way will introduce limited trading opportunities.

As indicated, setting is important with this pattern. The more grounded a downtrend and selling pressure the more probable the price will proceed with lower. Albeit the price action is choppy, rangy, or in a weak trend, the chances of progress on the pattern crumble.

There is no indication the way that far the price might fall, or on the other hand assuming it will fall by any means, after the pattern. This requires one more form of analysis.

Before trading any candlestick pattern, search for historical instances of how the pattern performed, including the two victors and failures.

Highlights

• The pattern doesn't demonstrate how far the price might decline (assuming it declines) following the pattern.
• The pattern happens in a downtrend and signals the expected continuation of that downtrend.
• It is formed when there is a down candle, a gap lower into one more down candle, and afterward an up candle that closes inside the gap.