Bulkowski’s Upside Tasuki Gap

Written and copyright © 2008-2010 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 upside Tasuki gap is a candlestick pattern that acts in reality as it is supposed to in theory. But it doesn’t do it very well. The frequency rank of 74 means it will be difficult to find, but once you to uncover one, the price move can be delicious. Let’s take a closer look.

Important Results

Theoretical performance: Bullish continuation Tested performance: Bullish continuation 57% of the time Frequency rank: 74 Overall performance rank: 5 Best percentage meeting price target: 38% (bear market, up breakout) Best average move in 10 days: -9.20% (bear market, down breakout) Best 10-day performance rank: 2 (bear market, down 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.

Upside Tasuki Gap

Discussion

The upside Tasuki gap is a candle that is suppose to be a bullish continuation pattern and it is, but only 57% of the time. I consider that "near random," so do not try to guess the breakout direction. The frequency rank is 74, so this may be a difficult candle pattern to find. I had trouble in the 4.7 million candle lines that I used. I discovered just 704 of them. The good news with this candle pattern is the overall performance rank of 5. Just four candle patterns perform better than this one over 10 days.

The best average move 10 days after the breakout is a drop of 9.2% in a bear market, ranking 2nd. I consider moves of 6% or higher as good, so this is a moon shot! A look at the numbers shows that the candle pattern in a bear market, regardless of the breakout direction, is the best performing. However, the bull market results aren’t bad either.

Identification Guidelines

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 Tasuki gap candles that appear within a third of the yearly low usually perform best -- page 890.
2. The candle breaks out upward most often -- page 894.
3. If the breakout is downward, the stock sometimes returns to the launch price -- page 893.

Example

The upside Tasuki gap candlestick appears circled in red on the daily scale. Price trends upward leading to the start of this candle pattern. Then a white candle appears. The next day, another white candle shows but this one gaps upward, leaving a price hole on the chart. Notice that the shadows of the two candles do not overlap. The final day is a black candle that opens within the body of the white middle candle of the 3-pack and closes inside the gap. The black candle does not close the gap if you ignore the shadows.

This upside Tasuki gap appears in an upward price trend and has an upward breakout. That means it acts as a bullish continuation candle. An upward breakout, by the way, occurs when the stock closes above the top of the candlestick pattern.

-- Thomas Bulkowski