Written and copyright © 2008-2014 by Thomas N. Bulkowski. All rights reserved.
In my book,
Encyclopedia of Candlestick Charts, pictured on the right,
I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines
in the tests.
The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines,
performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators),
and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy
by clicking on the above link.
The downside Tasuki gap is supposed to be a bearish continuation pattern, but testing shows that it acts as a bullish reversal, ranking 47th out of 103 candle patterns. That is, of course,
mid list. The frequency rank is 68 which suggests you will not find one of these in every grocery store. Perhaps they are only in the finer department stores where the high dollar items
are sold. Anyway, the overall performance is quite good, and a check of the numbers shows that the downside Tasuki gap is a respectable performer in all markets except for downward breakouts
in a bull market.
Downside Tasuki Gap Important Results
Theoretical performance: Bearish continuation
Tested performance: Bullish reversal 54% of the time
Frequency rank: 68
Overall performance rank: 23
Best percentage meeting price target: 44% (bear market, down breakout)
Best average move in 10 days: 4.69% (bear market, up breakout)
Best 10-day performance rank: 30 (bull market, up breakout)
All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.
The above numbers are based on hundreds of perfect trades. See the glossary for definitions.
Downside Tasuki Gap
Downside Tasuki Gap Discussion
As I mentioned in the introduction, the downside Tasuki gap is supposed to act as a bearish continuation, but testing shows that it acts as a bullish reversal 54% of the time. That
is what I call "near random." However, the overall performance rank is 23rd so the post breakout trend is a decent one.
The best average move 10 days after the breakout is a rise of 4.69% in a bear market. I consider moves of 6% or higher to be good ones, so this is well short of appealing. The best
10 day performance rank is 30th out of 103 candles after an upward breakout in a bull market. Since that represents the highest rank, the pattern could be a much stronger performer
when compared to other candlestick types.
Downside Tasuki Gap Identification Guidelines
|Number of candle lines||Three.|
|Price trend leading to the pattern||Downward|
|Configuration||Look for a black candle in a downward price trend followed by another black candle, but this one gaps lower with no shadow overlap between the two candles.
The final day sees a white candle print on the chart, one that opens within the body of the second candle and closes within the gap between the first and second candles.|
Three Trading Tidbits for Downside Tasuki Gap
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book
where the tips appear.
- Downside Tasuki gap candles that appear within a third of the yearly low perform best -- page 301.
- A 4 to 6 week downward move with a downside Tasuki gap is likely to see a reversal -- page 304.
- Look for the downside Tasuki gap to form as part of an inverted and ascending scallop -- page 304.
Downside Tasuki Gap Example
The chart shows a downside Tasuki gap circled in red on the daily scale. In this example, price trends lower for two months leading to the first black candle
of the downside Tasuki gap.
The next day, price gaps open lower forming another black candle but leaving a small space (price gap) between the bottom of the first candle and the top of the second. The last day a white candle appears
that opens within the body of the second candle and closes within the gap, completing the downside Tasuki gap.
The trend leading to the downside Tasuki gap is downward and so is the breakout (a downward breakout occurs when price closes below the bottom of the chart pattern). Anyway, this
downside Tasuki gap acts as a bearish continuation pattern, just as candle theory predicts.
-- Thomas Bulkowski
Copyright © 2008-2014 by Thomas N. Bulkowski. All rights reserved. Copywight 1995 Elmer Fudd. All wights wesewved.