Upside Tasuki gap and Downside Tasuki gap: Bullish and Bearish continuation pattern

UPSIDE TASUKI GAP

Description

The Upside Tasuki Gap is found in a rising trend. A white candle forms after gapping up from the previous white candle, as shown in Figure 3.1. The next day opens lower and closes lower than the previous day. If the gap is not filled, the bulls have maintained control. If the gap was filled, then the bullish momentum has come to an end. If the gap is not filled, it is time to go long if not long already. The definition of Tasuki is a sash that holds up one's sleeve.

Criteria

• An uptrend is in progress. A gap occurs between two candles of the same color.
• The color of the first two candles is the same as the prevailing trend.
• The third day, an opposite color candlestick opens within the previous candle and closes below the previous open. 
• The third day close does not fill the gap between the two white candles.
• The last two candles, opposite colors, are usually about the same size.

Pattern Psychology

Explaining the Tasuki Gap is simple. The Japanese place significance on gaps. When one appears in the middle of the trend and is not able to fill itself on weakness the next day, the strength is still in the uptrend. The pullback day is now construed as being a profit-taking day. (See Figure 3.2.)

DOWNSIDE TASUKI GAP

Description

The Downside Tasuki Gap is found during a declining trend. A black candle forms after gapping down from the previous black candle. The next day opens higher and closes higher than the previous day's open. If the gap is not filled, the bears have maintained control. If the gap was filled, then the bearish momentum has come to an end. If the gap is not filled, it is time to go short if not short already. You will find the Tasuki pattern more often in the Upside pattern than the Downside pattern. (See Figure 3.3.)

Criteria

• A downtrend is in progress. A gap occurs between two candles of the same color.
• The color of the first two candles is the same as the prevailing trend.
• The third day, an opposite color candlestick opens within the previous candle and closes below the previous open.
• The third day close does not fill the gap between the two black candles.
• The last two candles, opposite colors, are usually about the same size.

Pattern psychology

Just the opposite as the Upward Tasuki, explaining the Tasuki gap is simple. The Japanese put significance into gaps. When one appears in the middle of the trend and is not able to fill itself on strength the next day, the momentum is still in the downtrend. The bounceup day should be construed as being a short-covering day. After the short covering disappears, the selling continues. (See Figure 3.4.)