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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Upside Gap Three Methods

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Industrials (^DJI):
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Nasdaq (^IXIC):
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As of 09/18/2017
22,331 63.01 0.3%
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775 or 730 by 10/01/2017
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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

Upside Gap Three Methods Candlestick: Summary

The upside gap three methods candlestick is another rare candlestick, so take the performance numbers with a large dose of skepticism. The pattern is supposed to act as a bullish continuation, but I found it really functions as a bearish reversal. However, the reversal rate is what I call "near random." The frequency rank is 85, so you may not be able to find this pattern often enough to consider trading it. However, based on the few samples, it performs quite well in most markets 10 days after the breakout.

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My book, Encyclopedia of Candlestick ChartsEncyclopedia of Candlestick Charts book., pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

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Upside Gap Three Methods Candlestick: Important Results

Theoretical performance: Bullish continuation
Tested performance: Bearish reversal 59% of the time
Frequency rank: 85
Overall performance rank: 27
Best percentage meeting price target: 39% (bull market, up breakout)
Best average move in 10 days: 4.92% (bull market, up breakout)
Best 10-day performance rank: 12 (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.

The ideal upside gap three methods candlestick
Upside Gap Three Methods
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Upside Gap Three Methods Candlestick: Discussion

The upside gap three methods candlestick is supposed to act as a bullish continuation pattern, but my tests revealed that it functions as a bearish reversal 59% of the time. I consider that "near random" because you cannot tell with any accuracy which direction the breakout will occur.

The overall performance rank is 27, which is quite high. Looking at the numbers, we find that the best average move 10 days after the breakout is a rise of 4.92% in a bull market. That ranks 12th, but it is well short of the 6% move that I consider good.

Upside Gap Three Methods Candlestick: Identification Guidelines

CharacteristicDiscussion
Number of candle linesThree.
Price trend leading to the patternUpward.
ConfigurationLook for two tall white candles in an upward price trend. There should be a gap between them, including between the shadows. The last day is a black candle that fills the gap created by the first two days.
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Upside Gap Three Methods Candlestick: Three Trading Tidbits

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.

  1. Upside gap three methods candles that appear within a third of the yearly low act as reversals most often -- page 876.
  2. Select tall candles for the best performance -- page 873.
  3. Expect a downward breakout -- page 876.

The upside gap three methods candlestick on the daily scale

Upside Gap Three Methods Candlestick: Example

The upside gap three methods candlestick appears on the daily chart circled in red. The first two candles are white ones, tall and handsome with a gap between them. The last day a black candle fills the gap. That means the price action opens above the lower shadow of the second day and has a low below the upper shadow of the first day.

Imagine shorting the stock on the downward breakout from this upside gap three methods candlestick. Wow! Price moves up leading to the candle and then breaks out downward the day after the pattern completes. Thus, the candle is a reversal of the upward trend. But the downtrend last just a day before beginning its rise to a new high, and a strong trend it is, too, soaring almost 40% in a month.

-- Thomas Bulkowski

 

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. If opportunity doesn't knock, build a door -- Milton Berle.