Ready (Green), Ready (green), and Stop (red) are what define an Upside Tasuki Gap Candlestick. Candlestick patterns majorly indicate trend reversals which are of two kinds:
- Trend Reversal Candlesticks:
Candlestick patterns such as Bullish Engulfing, Morning Star, Hammer, etc. majorly act as Trend Reversal Candlesticks. If a bullish candlestick pattern is spotted at the end of a downtrend, it signifies that a reversal in the trend is probable. These patterns should appear at the end of a trend.
- Trend Confirmation Candlesticks: In a similar fashion a few candlestick patterns appear in the middle of a trend. Such candlestick patterns are based on other Technical Indicators in the Stock Market, and going by the name, signifies more validation of a trend.
Fun Fact: In the stock market, trend-reversal candlesticks act as trend-confirmation candlesticks as well, but the vice versa is not true.
What is an Upside Tasuki Gap Candlestick?
An Upside Tasuki Gap Candlestick Pattern is a three-bar candlestick pattern which is a major Up-trend confirmation candlestick pattern.
Let us demonstrate this with an example over a Daily chart:
Day 1: The candle formed on Day 1 will be a large white/green candlestick depicting an uptrend.
Day 2: A green candlestick with a gap-up opening having a higher close than the earlier day.
Day 3: A red candlestick should form on Day 3 which closes after passing through the gap between the first two bars. This close should be above the close of Day 1’s bullish candlestick.
This up move/uptrend can be confirmed by the next day’s bullish candlestick.
Note: It is to be noted that this entire article is explained by taking the example of a Daily chart timeframe. The same would be applied for higher time frames, but on 4h, 1h, or lower timeframe might give false signals.
More Interesting Facts About Upside Tasuki Gap:
Other names of these candlestick patterns are Bullish Tasuki Gap, Upward Gap Tasuki, etc.
The converse of this Upside Tasuki Gap is a Downside Tasuki Gap that appears in the mid of a downtrend and confirms that the bears are still in control.
Characteristics of an Upside Tasuki Gap
|Total number of candles||Requires three for the formation|
|Usage||Spotting this candlestick during an uptrend supplements the trend with more confirmation|
|Formation Of This Candlestick||Green candlestickGreen candle with a gap-up opening red candle that opens at a price between the body of the prior green candle, passes through the gap created between the first two candles, and then closes inside immediately.|
Note: It is important to note that no indicator in the stock market can have a 100% success rate. A success rate of 50-55% indicates that this candlestick performed well in bull markets rather than bear markets. This pattern’s success rate falls under this category.
Analyzing the behavior of the Upside Tasuki Gap Candlestick:
Tools in Stock Market Technical Analysis such as Price Patterns, Candlestick Structures, portray the moves of institutional traders. It is always a best practice to understand the complete story. It helps traders in the following ways:
- It assists traders in making the right trading decisions.
- It further makes traders get habituated to analyzing the reasons behind trades.
- It amplifies the learning of Technical Analysis stock market skills, thus transforming a newbie trader into an experienced trader.
Now, when it comes to an Upside Tasuki Gap Candlestick Pattern, the first candle indicates that buyers have strong momentum and are driving the market in a bullish direction.
After the formation of this long bullish candlestick pattern on Day 1, the gap-up bullish candlestick pattern on Day 2 signifies a massive momentum of buyers entering that instrument. Multiple buy orders placed after the end of a trading session are responsible for this gap-up opening.
The first two Bullish Candlesticks depict a bullish impulsive wave, creating a fear of an ‘overbought zone’ among buyers. This results in a formation of a bearish candle on Day 3. This candle acts as a small pullback by giving a small pause to an uptrend.
- If the retracement is deep, it indicates that the strength of the uptrend is poor. On the contrary, a minor retracement implies that the uptrend is strong. This is the major reason why the close of the Bearish Candlestick in an Upside Tasuki Candlestick Pattern should be above the closing price of the first Bullish Candlestick.
- The strength of the bulls should further be confirmed by the bullish candle on the next day.
Bonus Technical Knowledge:
Pullback or retracement indicates a temporary pause in the current trend direction, whereas a reversal indicates a longer change in the direction of an overall trend.
For example, say there is an uptrend. The upside move in an uptrend is called as a bullish impulse. The small bearish move in an uptrend is termed as a retracement.
Similarly, in a downtrend in the Stock Market, the major downfall is called an impulse. A small upward move in a downtrend will be called a pullback.
If a trend changes from an uptrend to a downtrend and vice-versa, then it is called reversal.
Can Traders Initiate Trades Using an Upside Tasuki Candlestick Pattern?
Upside Tasuki Candlestick in Technical Analysis of Stock Markets is a trade-confirmation Candlestick Pattern rather than a trade-initiating candlestick pattern.
Upside Tasuki + Moving Averages:
1. First, plot a fast exponential Moving Average (around 20) and a fast exponential Moving Average (around 40) on the Stock Chart.
2. If the price is moving above these Moving Averages, then this confirms that the equity is moving in an uptrend, and the sentiment for that Stock in the Stock Market is bullish.
3. Hence, if a trade has already been initiated, holding on to the trade till a moving average crossover happens in a bearish direction is good for minting more profits.
In the same way, this candlestick pattern should be used in conjunction with other Technical Indicators in the Stock Market for trend confirmation.
Tip: To learn more about these Technical Indicators in The Stock Market, Goela School Of Finance is one of the Best Online Stock Market Institutes In India.