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Sanku (Three Gaps) Pattern

Sanku, also known as the Three Gaps pattern, is a Japanese candlestick pattern that consists of three distinct gaps occurring within a well-defined trend.

These gaps may occur consecutively or be separated by several candles.

The appearance of this pattern often suggests that the trend may be nearing exhaustion, signaling traders to watch for potential signs of a reversal.

triple gap candlestick pattern

Understanding the Sanku (Three Gaps) Pattern

The Sanku pattern can occur in both uptrends and downtrends.

In an uptrend, the pattern is referred to as the Rising Three Gaps, where three gaps higher are separated by rising candles.

Conversely, in a downtrend, the pattern is called the Falling Three Gaps, with three gaps lower separated by declining candles.

The gaps may be spaced out over several candles, not just one.

The Sanku pattern indicates strong price action, but it may not be sustainable for long.

In the Rising Three Gaps pattern, the gaps represent aggressive buying.

As the number of buyers diminishes, former buyers may start selling to lock in profits, which can signal the beginning of a reversal.

The pattern is a warning that the trend might be overheating, although it is not a definitive sign of reversal.

A reversal is more likely when the price fills the third gap by moving in the opposite direction.

For example, in an uptrend, if the price drops below the entire third gap, it could indicate that a reversal to the downside is in progress.

The same concept applies in a downtrend when the price moves up through the third gap.

Examples of How to Use the Sanku (Three Gaps) Pattern

The Sanku pattern is typically formed by a bullish candle, followed by a gap higher, another bullish candle, another gap higher, and then a final gap higher with another candle.

Each of these candles could consist of multiple smaller candles, especially in fast-moving markets.

Even two gaps with significant price moves between them can signal that the trend is nearing exhaustion.

For traders looking to lock in profits, the Sanku pattern suggests trailing stop losses behind recent candle lows or the lows of the most recent gap.

When the price drops below the most recent gap higher, it could indicate that the trend is reversing.

This could be a temporary pullback or a long-term top, depending on the context and size of the price moves during the pattern.

If the pattern leads to a long-term decline, it may be indicative of a climax top, especially if accompanied by very high volume.

Some traders may initiate short positions once the reversal begins, placing stop losses above the recent candle or the high of the entire pattern.

The Difference Between the Sanku (Three Gaps) Pattern and Three White Soldiers

The Sanku (Three Gaps) pattern and the Three White Soldiers pattern are both candlestick patterns, but they signal different market behaviors.

The Three White Soldiers pattern occurs after a downtrend and consists of three large upward candles, indicating a potential new uptrend.

In contrast, the Falling Three Gaps pattern occurs during a downtrend and is part of the Sanku pattern.

Limitations of the Sanku (Three Gaps) Pattern

Not all Sanku patterns will result in a reversal.

Consecutive small gaps can occur in uptrends or downtrends for extended periods, which might lead traders to exit positions prematurely and miss out on further gains.

Determining which three gap patterns are significant is subjective.

The larger the price moves and gaps, the more important the pattern is likely to be.

The overall context and market outlook are also crucial.

The Sanku pattern may result in only a minor pullback, or it could precede a full trend reversal.

Finally, the Sanku pattern does not provide a specific profit target, so traders need to use other analysis methods to determine when to exit trades based on this pattern.

Concluding Thoughts

The Sanku (Three Gaps) pattern is a powerful candlestick formation that can signal the potential exhaustion of a trend.

While it can indicate an impending reversal, traders should be cautious and consider the overall context before making trading decisions based on this pattern.

As with any technical analysis tool, combining the Sanku pattern with other indicators and analysis methods can help improve the reliability of trading decisions.

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Stalled Pattern (Deliberate Pattern)

A stalled pattern is a candlestick chart pattern that occurs during an uptrend but signals a potential bearish reversal.

It is also referred to as a deliberation pattern.

Candlestick charts display the open and closing prices of a security, along with their highs and lows for a specific period.

These charts are named after the way the illustrations resemble candles and their wicks.

A stalled pattern suggests indecision in the market and may indicate a limited potential for traders to turn a quick profit through short-term trades.

stalled pattern

Understanding Stalled Patterns

A stalled pattern does not always result in a bearish reversal.

However, if the candle following the stalled pattern moves below the midpoint of the second candle’s real body, a bearish reversal becomes more likely.

Traders often interpret this as a signal to consider cutting their losses.

Reversals can occur rapidly, sometimes within a single day.

However, market analysts often look for reversals that unfold over longer periods, such as weeks.

Technical analysts scan for reversal patterns throughout the day to inform their trading strategies.

Intraday reversals are usually triggered by events like company announcements or news reports that can quickly alter investor sentiment.

A bearish trend, or downward trend, is characterized by a series of lower highs and lower lows.

Once bearish, a market can reverse into an uptrend when both the highs and lows begin to rise.

Understanding Candlestick Charts

A stalled pattern chart consists of three white candles and must meet specific criteria.

First, each candle’s open and close must be higher than that of the previous candle in the pattern.

Second, the third candle must have a shorter real body than the other two candles.

Finally, the third candle should have a tall upper shadow, with an open that is near the close of the second candle.

The wide part of the candle on the chart is known as the real body.

It represents the range between the opening and closing prices of a security over a given time period.

If the real body is black or red, it indicates that the stock closed lower than it opened.

If it is white or green, the stock closed higher.

Investors and market observers can also look for reversals in subsequent candles that follow the stalled pattern.

One indicator of such a reversal is the bearish engulfing pattern.

Concluding Thoughts

The stalled pattern is an important candlestick formation that can signal a potential shift in market sentiment.

While it does not always lead to a bearish reversal, traders should be cautious when they spot this pattern, especially if subsequent price action confirms the reversal.

Understanding the nuances of candlestick charts, including patterns like the stalled pattern, can provide traders with valuable insights into market movements and help inform their trading decisions.

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Advanced Block Pattern

An advance block is a candlestick trading pattern that typically suggests a potential reversal from an upward trend to a downward trend. This pattern is formed by three consecutive candlesticks and is generally considered bearish. However, some analysts note that the pattern can also lead to a continuation of the bullish trend instead of a reversal.

advanced block candlestick pattern

Key Characteristics of an Advance Block

The advance block candlestick pattern is identified by the following features:

  • Upward Trend: The pattern appears after an established upward trend or a significant bounce within a broader downtrend.
  • Three Candles: The pattern consists of three consecutive white (bullish) candlesticks, each with progressively shorter real bodies.
  • Open Positions: The opening prices of the second and third candles fall within the real bodies of the previous candles.
  • Upper Shadows: The upper shadows of the candles, particularly the last one, become progressively taller, indicating increasing selling pressure.

Interpretation of the Advance Block Pattern

The advance block pattern is often seen as a precursor to a bearish reversal, particularly when it occurs during temporary upward moves within a larger downtrend.

The pattern suggests that the bullish momentum is weakening, as indicated by the progressively shorter real bodies and the increasing upper shadows.

A reversal is confirmed if the price drops below the midpoint of the first candle’s real body in the following sessions.

Trading Psychology Behind the Advance Block

In this pattern, the first candle represents strong bullish sentiment, pushing the price to a new high.

However, the second candle opens lower, signaling a potential loss of momentum. This lower opening may cause concern among bulls who expected higher prices following the strong first candle.

The third candle’s lower opening and weaker performance further indicate that buying power is diminishing.

If the security fails to continue gaining and instead reverses, it confirms the bearish reversal, suggesting that traders are beginning to take profits or initiate short positions.

Limitations of the Advance Block Pattern

  • Reliability: The success rate of the advance block pattern in predicting reversals is only slightly better than random, making it a less reliable standalone signal.
  • Bullish Continuation: The pattern can sometimes lead to a continuation of the bullish trend, especially if the security continues to rise and trades above the third candle’s shadow.

Concluding Thoughts

The advance block candlestick pattern is a useful tool for traders looking to anticipate potential reversals in upward trends.

However, its reliability is not particularly high, and it is best used in conjunction with other technical indicators or chart patterns.

Understanding the context of the overall trend and looking for confirmation in subsequent price action can help traders make more informed decisions when encountering this pattern.

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Tower Top & Tower Bottom

Candlestick patterns are an essential component of technical analysis, offering traders insights into potential market reversals. While relying solely on candlestick patterns may be unstable, they can significantly supplement a well-rounded trading system that incorporates other strategies. Among these patterns, the Tower Top and Tower Bottom are classic reversal formations that indicate a change in market sentiment.

Tower top candlestick pattern

Tower Top Candlestick Pattern

The Tower Top candlestick pattern signals a potential reversal from a bullish to a bearish trend.

Formation:

  • The pattern starts with a strong bullish movement, typically represented by a large green candlestick.
  • This is followed by a period of sideways movement, characterized by small candlesticks, often of varying colors and sizes, indicating market indecision.
  • The pattern culminates with one or more large bearish candlesticks that break the prior support levels, suggesting that the upward momentum has ended and a downtrend is beginning.

Key Characteristics:

  • The pattern often appears after a significant upward movement, marked by several large green candlesticks.
  • It signals a bearish reversal, indicating that buyers are losing momentum and sellers are starting to take control.
  • The pattern is confirmed if the final bearish candlestick is long, signaling a strong move downward.

Chart Example:
A typical Tower Top pattern may include a sequence of small-bodied candlesticks following a large bullish candlestick. The bearish candlestick at the end of the pattern usually marks the start of a downtrend, particularly if it breaks below the lows of the preceding small-bodied candlesticks.

Notes:

  • The Tower Top is most reliable when it occurs after a significant price increase.
  • It does not require multiple large bearish candlesticks for confirmation; one strong bearish candlestick is often sufficient.
  • The pattern is invalidated if the final bearish candlestick is not long enough to signal a clear reversal.

Tower bottom candlestick pattern

Tower Bottom Candlestick Pattern

The Tower Bottom is the bullish counterpart to the Tower Top, indicating a potential reversal from a bearish to a bullish trend.

Formation:

  • The pattern begins with a strong downward movement, usually represented by a large red candlestick.
  • This is followed by a series of smaller candlesticks that indicate a slowdown in the downward momentum, often moving sideways.
  • The pattern is completed by a large bullish candlestick that closes near or above the levels of the preceding smaller candlesticks, suggesting that the downtrend has ended and an uptrend is beginning.

Key Characteristics:

  • The Tower Bottom typically forms at the end of a prolonged downtrend.
  • It suggests that sellers are losing momentum and buyers are starting to regain control.
  • The pattern is confirmed when the final bullish candlestick is large, signaling a strong upward move.

Chart Example:
In a Tower Bottom pattern, you may observe a large red candlestick followed by several smaller bearish candlesticks. The pattern is confirmed when a large bullish candlestick emerges, closing near the levels of the initial large red candlestick, signaling the start of an uptrend.

Notes:

  • The Tower Bottom is most effective when it follows a significant price decline.
  • The pattern may be preceded by a Bullish Harami, which can act as an early indicator of the upcoming reversal.
  • The pattern is invalidated if the final bullish candlestick does not show a strong reversal.

Limitations

While Tower Top and Tower Bottom patterns can be effective when correctly identified, they also carry the risk of misinterpretation.

Common Pitfalls:

  • Misreading the pattern can lead to premature exits or entries, resulting in potential losses.
  • Patience is crucial when identifying these patterns, as a failed Tower Top or Bottom can result in inaccurate predictions of market direction.

Key Considerations:

  • Ensure that the pattern is supported by other technical indicators or significant support/resistance levels before making trading decisions.
  • Avoid making hasty conclusions based solely on the appearance of two consecutive peaks or troughs.

Concluding Thoughts

The Tower Top and Tower Bottom candlestick patterns are powerful tools for identifying potential market reversals.

When used correctly, they can provide valuable insights into shifts in market sentiment, helping traders anticipate changes in trend direction.

However, these patterns should be used in conjunction with other technical indicators and a solid understanding of market dynamics to maximize their effectiveness and minimize the risk of misinterpretation.

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Kicker Pattern

A kicker pattern is a two-bar candlestick formation that signals a potential reversal in the direction of an asset’s price trend.

This pattern is marked by a sharp reversal in price over the span of two candlesticks, making it a significant indicator for traders who seek to understand which group—buyers or sellers—is currently in control of the market.

Key Characteristics

  • Reversal Indicator: The kicker pattern is known for predicting a change in the price direction, usually due to a significant shift in investor sentiment.
  • Two Candlesticks: The pattern consists of two candlesticks where the first follows the prevailing trend, and the second sharply reverses direction, gapping away from the first.
  • Market Sentiment: The pattern typically follows the release of impactful information about a company, industry, or the broader economy, leading to a sudden change in sentiment.

Types of Kicker Patterns

  • Bullish Kicker: Begins with a bearish candle, followed by a bullish candle that gaps up, indicating a shift from bearish to bullish sentiment.
  • Bearish Kicker: Starts with a bullish candle, followed by a bearish candle that gaps down, signaling a change from bullish to bearish sentiment.

Understanding the Kicker Pattern

The kicker pattern is considered one of the most reliable and powerful reversal signals in technical analysis.

Its significance is often amplified when it occurs in overbought or oversold conditions.

The pattern indicates a dramatic shift in investor sentiment, often triggered by new and valuable information affecting the market.

The pattern’s sharp reversal is not to be confused with a gap pattern, as the kicker pattern implies a complete shift in market control, not just a continuation in the same direction.

How the Kicker Pattern Works

When the kicker pattern forms, it typically catches the attention of traders because it suggests that the price has moved decisively, possibly too quickly.

While some traders may wait for a pullback, the strength of the kicker pattern often leaves them wishing they had acted immediately.

This pattern is rare, but when it appears, it serves as a strong signal that the prevailing market sentiment has dramatically shifted.

Concluding Thoughts

The kicker pattern is one of the most potent reversal indicators available to technical analysts, providing a clear signal of a significant change in market sentiment.

Although it is a rare pattern, its appearance often coincides with dramatic shifts in investor attitudes, making it a critical pattern for traders to recognize.

Given its reliability and the strength of the signal it provides, the kicker pattern should be used in conjunction with other technical indicators to confirm the potential for a trend reversal.

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